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Matthews China Dividend Fund
MCDFX

Snapshot
  • Total return strategy seeks to access the growth of China with lower volatility
  • Unconstrained all-cap portfolio with a quality bias
  • Flexible approach offers participation in both growth and value markets

11/30/2009

Inception Date

-11.73%

YTD Return

(as of 09/22/2023)

$12.04

NAV

(as of 09/22/2023)

+0.30

1 Day NAV Change

(as of 09/22/2023)

Objective

Total return with an emphasis on providing current income.

Strategy

Under normal circumstances, the Matthews China Dividend Fund seeks to achieve its investment objective by investing at least 80% of its net assets, which include borrowings for investment purposes, in dividend-paying equity securities of companies located in China. The Fund may also invest in convertible debt and equity securities. The Fund seeks to provide a level of current income that is higher than the yield generally available in Chinese equity markets over the long term.

Risks

Investments in Asian securities may involve risks such as social and political instability, market illiquidity, exchange-rate fluctuations, a high level of volatility and limited regulation. Investing in emerging markets involves different and greater risks, as these countries are substantially smaller, less liquid and more volatile than securities markets in more developed markets. In addition, investments in a single-country fund, which is considered a non-diversified fund, may be subject to a higher degree of market risk than diversified funds because of concentration in a specific country. There is no guarantee that the Fund or the companies in its portfolio will pay or continue to pay dividends.

These and other risks associated with investing in the Fund can be found in the prospectus.

Fund Facts
Inception Date 11/30/2009
Fund Assets $163.06 million (08/31/2023)
Currency USD
Ticker MCDFX
Cusip 577-125-305
Portfolio Turnover 67.1%
Benchmark MSCI China Index
Geographic Focus China - China includes its administrative and other districts, such as Hong Kong
Fees & Expenses
Gross Expense Ratio 1.20%

Performance

  • Monthly
  • Quarterly
  • Calendar Year
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As of 08/31/2023
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews China Dividend Fund - MCDFX
11/30/2009
MCDFX
-9.03% 0.66% -10.63% -5.92% -6.90% -0.30% 5.32% 6.47%
MSCI China Index
-8.95% 5.00% -4.51% -7.36% -14.14% -3.75% 2.66% 1.99%
As of 06/30/2023
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews China Dividend Fund - MCDFX
11/30/2009
MCDFX
2.73% -11.33% -8.79% -11.93% -3.37% -1.18% 5.92% 6.72%
MSCI China Index
4.02% -9.65% -5.39% -16.69% -10.13% -5.14% 3.22% 1.94%
For the years ended December 31st
Name 2022 2021 2020 2019 2018 2017 2016 2015 2014 2013
Matthews China Dividend Fund - MCDFX
MCDFX
-16.75% -0.49% 24.22% 15.00% -9.98% 37.69% 5.70% 9.54% 0.93% 13.35%
MSCI China Index
-21.80% -21.64% 29.67% 23.66% -18.75% 54.33% 1.11% -7.62% 8.26% 3.96%

Source: BNY Mellon Investment Servicing (US) Inc. All performance is in US$.

Assumes reinvestment of all dividends and/or distributions before taxes. All performance quoted represents past performance and is no guarantee of future results. Investment return and principal value will fluctuate with market conditions so that when redeemed, shares may be worth more or less than their original cost. Current performance may be lower or higher than the return figures quoted. Returns would have been lower if certain of the Fund’s fees and expenses had not been waived. Performance differences between the Institutional class and the Investor class may arise due to differences in fees charged to each class.

Additional performance, attribution, liquidity, value at risk (VaR), security classification and holdings information is available on request for certain time periods.

Growth of a Hypothetical $10,000 Investment Since Inception

(as of 06/30/2023)

Source: BNY Mellon Investment Servicing (US) Inc. All performance is in US$.

The performance data and graph do not reflect the deduction of taxes that a shareholder would pay on dividends, capital gain distributions or redemption of fund shares.

Yield

(as of 06/30/2023)
1.76% 30-Day SEC Yield
1.76% 30-Day SEC Yield (excluding expense waiver)
3.32% Dividend Yield

30-Day SEC Yield Source: BNY Mellon Investment Servicing (US) Inc.

Ratings

  • OVERALL
  • out of 101 funds
  • 3 YEAR
  • out of 101 funds
  • 5 YEAR
  • out of 78 funds
  • 10 YEAR
  • out of 54 funds
  • 1 YEAR
  • 1st
  • 20 out of 110 funds
  • 3 YEAR
  • 2nd
  • 32 out of 91 funds
  • 5 YEAR
  • 2nd
  • 26 out of 73 funds
  • 10 YEAR
  • 1st
  • 8 out of 49 funds
  • SINCE INCEPTION
  • 1st
  • 3 out of 37 funds

Ratings agency calculation methodology

Portfolio Managers

Sherwood  Zhang, CFA photo
Sherwood Zhang, CFA

Lead Manager

Winnie  Chwang photo
Winnie Chwang

Lead Manager

Elli  Lee photo
Elli Lee

Co-Manager

Andrew  Mattock, CFA photo
Andrew Mattock, CFA

Co-Manager

Portfolio Characteristics

(as of 06/30/2023)
Fund Benchmark
Number of Positions 36 758
Weighted Average Market Cap $86.0 billion $117.9 billion
Active Share 76.6 n.a.
P/E using FY1 estimates 10.5x 10.1x
P/E using FY2 estimates 8.9x 9.0x
Price/Cash Flow 6.5 5.9
Price/Book 1.4 1.3
Return On Equity 14.5 11.4
EPS Growth (3 Yr) 8.0% 14.2%

Sources: Factset Research Systems, Inc.

Risk Metrics (3 Yr Return)

(as of 06/30/2023)
4.56%
Alpha
0.80
Beta
83.41%
Upside Capture
81.44%
Downside Capture
-0.19
Sharpe Ratio
0.63
Information Ratio
10.68%
Tracking Error
87.67

Fund Risk Metrics are reflective of Investor share class.

Sources: Zephyr StyleADVISOR

Top 10 Holdings

(as of 08/31/2023)
Name Sector % Net Assets
Tencent Holdings, Ltd. Communication Services 10.4
Alibaba Group Holding, Ltd. Consumer Discretionary 9.7
CITIC Telecom International Holdings, Ltd. Communication Services 6.1
Ping An Insurance Group Co. of China, Ltd. Financials 3.4
Yangzijiang Shipbuilding Holdings, Ltd. Industrials 3.4
CSC Financial Co., Ltd. Financials 3.3
Tsingtao Brewery Co., Ltd. Consumer Staples 3.2
Wuliangye Yibin Co., Ltd. Consumer Staples 3.1
MINISO Group Holding, Ltd. Consumer Discretionary 3.0
Haier Smart Home Co., Ltd. Consumer Discretionary 2.7
TOTAL 48.3

Top 10 holdings may combine more than one security from the same issuer and related depositary receipts.

Source: BNY Mellon Investment Servicing (US) Inc.

Portfolio Breakdown (%)

(as of 06/30/2023)
  • Sector Allocation
  • Asset Type Breakdown
  • Market Cap Exposure
  • China Exposure
Sector Fund Benchmark Difference
Consumer Discretionary 27.4 28.7 -1.3
Communication Services 16.0 19.8 -3.8
Financials 13.9 16.3 -2.4
Consumer Staples 8.8 5.8 3.0
Information Technology 6.9 6.2 0.7
Industrials 6.2 5.6 0.6
Health Care 6.2 5.5 0.7
Real Estate 5.9 3.1 2.8
Materials 5.1 3.3 1.8
Energy 1.9 3.0 -1.1
Utilities 0.0 2.6 -2.6
Cash and Other Assets, Less Liabilities 1.9 0.0 1.9

Sector data based on MSCI’s revised Global Industry Classification Standards. For more details, visit www.msci.com.

Asset Type Fund
Common Equities and ADRs 98.2
Cash and Other Assets, Less Liabilities 1.9
Equity market cap of issuer Fund Benchmark Difference
Mega Cap (over $25B) 38.6 62.5 -23.9
Large Cap ($10B-$25B) 16.4 21.1 -4.7
Mid Cap ($3B-$10B) 24.1 14.2 9.9
Small Cap (under $3B) 19.0 2.3 16.7
Cash and Other Assets, Less Liabilities 1.9 0.0 1.9
China Exposure Portfolio Weight
SAR (Hong Kong) 36.3
H Shares 25.1
A Shares 14.4
Overseas Listed Companies (OL) 11.9
China-affiliated corporations (CAC) 6.1
B Shares 2.1
Unassigned 2.3
Cash and Other Assets, Less Liabilities 1.9

Definitions: SAR (Hong Kong) companies are companies that conduct business in Hong Kong and/or mainland China. China-affiliated corporations [CAC], also known as "Red Chips," are mainland China companies with partial state ownership listed in Hong Kong, and incorporated in Hong Kong. China A Shares are Mainland Chinese companies incorporated in China and listed on the Shanghai or Shenzhen exchanges, available mostly to local Chinese investors and qualified institutional investors. H Shares are mainland Chinese companies listed on the Hong Kong exchange but incorporated in mainland China. B Shares are mainland Chinese companies listed on the Shanghai and Shenzhen stock exchanges, available to both Chinese and non-Chinese investors. Overseas Listed [OL] companies are companies that conduct business in mainland China but listed in overseas markets such as Japan, Singapore, Taiwan and the United States.

Source: FactSet Research Systems.

Percentage values in data are rounded to the nearest tenth of one percent, so the values may not sum to 100% due to rounding. Percentage values may be derived from different data sources and may not be consistent with other Fund literature.

Distributions

Record Date Ex, Pay and
Reinvest Date
Ordinary
Income
Short Term
Capital Gains
Long Term
Capital Gains
Total Distributions
Per Share
% of NAV Nondividend Distribution (Return of Capital)
06/27/2023 06/28/2023 $0.32906 $0.00000 $0.00000 $0.32906 2.6% N.A.
12/13/2022 12/14/2022 $0.10770 $0.00000 $0.25441 $0.36211 2.5% N.A.
06/27/2022 06/28/2022 $0.41693 $0.00000 $0.00000 $0.41693 2.8% N.A.
View History

 

There is no guarantee that the Fund will pay or continue to pay distributions. 

Past performance is no guarantee of future results. Investment return and principal value will fluctuate with changing market conditions so that shares, when redeemed, may be worth more or less than their original cost.

Commentary

Period ended June 30, 2023

For the first half of 2023, the Matthews China Dividend Fund returned -8.79% (Investor Class) and -8.70% (Institutional Class), while its benchmark, the MSCI China Index, returned -5.39% over the same period. For the quarter ending June 30, 2023, the Fund returned -11.33% (Investor Class) and -11.24% (Institutional Class), while the benchmark returned -9.65%.

Market Environment:

Chinese equities performed sluggishly in the first half after the post-zero-COVID reopening rally fizzled out in February as consumption data in the period disappointed the market. During the second-quarter holiday festivals of Qing Ming in April, May Day and Duan Wu in June, there was surging demand for travel, and tourist numbers and hotel room rates recovered back to pre-COVID levels. However, spending during the periods remained below pre-COVID levels indicating that Chinese consumers lacked the confidence to spend.

The real estate market is also creating worries as new home sales shrank during the first six months of the year. This has generated calls for the government to further relax the cooling measures it put in place toward the end of the sector’s almost 20-year-long boom. Chinese equities rallied a number of times in the first half on speculation the government was considering certain stimulus policies. However, we think there is limited room to ease monetary policy as the U.S. economy continues to defy the risk of recession. China’s central bank cannot cut interest rates too aggressively as that could create further depreciation pressure on an already weakened Chinese renminbi. A cheap renminbi is good for China’s exports but not for encouraging inward capital flows.  

In addition to China’s uneven recovery, the impact of geopolitical tensions was also present, as the U.S. further tightened restrictions on exports to China of key semiconductor manufacturing equipment and materials.

Performance Contributors and Detractors:

At the sector level, stock selection in IT, communication services and consumer staples were the biggest contributors to relative performance. On the other hand, our overweight and stock selection in real estate was the biggest detractor—and we are revaluating our positions and allocation in the sector. Our underweight and stock selection in financials and stock selection in industrials also detracted.  

At the holdings level, CITIC Telecom was the top performer in the first half. The Macau telecom operator has a stable local business while the returning mainland tourists provide a rebound of roaming revenue. Yadea Group was the second-best performer. We have confidence in the prospects of the electric scooter manufacturer which is developing sodium-ion battery to help solidify its market leadership position. Tencent was the third-best performer. The internet platform reported better-than-expected earnings and management has said it is confident that all its units will recover strongly in 2023. The 50% increase in its annual dividend payment also shows confidence in its financial strength. However, Tencent’s largest shareholder’s plan to further divest shares will create more volatility for the stock.

In contrast, China’s largest duty-free shopping operator China Tourism Group Duty Free, and Hainan Meilan International Airport, which also has significant exposure to duty-free shopping revenue, were among the bottom performers in the period. As Chinese tourists can now go outside the border, Hainan has lost its monopoly status in duty-free shopping. In addition, Chinese consumers are spending less on discretionary items such as cosmetics. We are evaluating the situation carefully.

Notable Portfolio Changes:

During the second quarter, we initiated a new position in the Hong Kong shares of CSC Financial, a brokerage house and investment bank more commonly known as China Securities. The firm, which is less well-known among foreign investors, has been consistently ranked among the top three domestic brokers, especially in terms of securities underwriting. We believe it will benefit from new capital market reforms and its valuation on a price-to-earnings (P/E) ratio basis and discount to its mainland-listed A-shares are very attractive.

We have exited our position in Meituan as the company is facing new competition from ByteDance and is also entering new markets such as Hong Kong. These competitive threats and new investment will make Meituan less likely to achieve near-term profitability, which was our original expectation. In addition, we also exited Hainan Meilan International Airport, as the recovery of both of its traffic and duty-free business is proving challenging.

Outlook:  

While we share some near-term concern over the Chinese economy with many observers, such as unemployment of young people and private enterprises’ low appetite for expansion, we continue to believe the elements of the country’s economic success are still in place. And the current market valuation of Chinese equities is not reflecting an economic revival—many Chinese consumer company shares, for example, have plunged back to last October’s levels. We continue to believe therefore that holding high-quality Chinese companies has the potential to offer very attractive rewards for investors over the long term.

Price-to-earnings (P/E) ratio: Is a valuation ratio of a company's current share price compared to its per-share earnings.

 

Top 10 holdings as of June 30, 2023. Current and future holdings are subject to change and risk.

 

Average Annual Total Returns - MCDFX as of 06/30/2023
1YR 3YR 5YR 10YR Since Inception Inception Date
-11.93% -3.37% -1.18% 5.92% 6.72% 11/30/2009

All performance quoted is past performance and is no guarantee of future results. Investment return and principal value will fluctuate with changing market conditions so that shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the return figures quoted. Returns would have been lower if certain of the Fund's fees and expenses had not been waived. Please see the Fund's most recent month-end performance.

Fees & Expenses
Gross Expense Ratio 1.20%
Yields as of 06/30/2023
30-Day SEC Yield 1.76%
30-Day SEC Yield (excluding expense waiver) 1.76%
Dividend Yield 3.32%

The 30-Day SEC Yield represents net investment income earned by the Fund over the 30-day period ended 06/30/2023, expressed as an annual percentage rate based on the Fund’s share price at the end of the 30-day period. The 30-Day SEC Yield should be regarded as an estimate of the Fund’s rate of investment income, and it may not equal the Fund’s actual income distribution rate. Source: BNY Mellon Investment Servicing (US) Inc.

Dividend Yield (trailing) is the weighted average sum of the dividends paid by each equity security held by the Fund over the last 12 months divided by the current price as of report date. The annualised dividend yield is for the equity-only portion of the Fund and does not reflect the actual yield an investor in the Fund would receive. There can be no guarantee that companies that the Fund invests in, and which have historically paid dividends, will continue to pay them or to pay them at the current rates in the future. A positive distribution yield does not imply positive return, and past yields are no guarantee of future yields.

Investments in Asian securities may involve risks such as social and political instability, market illiquidity, exchange-rate fluctuations, a high level of volatility and limited regulation. Investing in emerging markets involves different and greater risks, as these countries are substantially smaller, less liquid and more volatile than securities markets in more developed markets. In addition, investments in a single-country fund, which is considered a non-diversified fund, may be subject to a higher degree of market risk than diversified funds because of concentration in a specific country. There is no guarantee that the Fund or the companies in its portfolio will pay or continue to pay dividends.

There is no guarantee that a company will pay or continue to increase dividends. Past performance is no guarantee of future results.

 

Visit our Glossary of Terms page for definitions and additional information.

Index Definitions

The information contained herein has been derived from sources believed to be reliable and accurate at the time of compilation, but no representation or warranty (express or implied) is made as to the accuracy or completeness of any of this information. Neither the funds nor the Investment Advisor accept any liability for losses either direct or consequential caused by the use of this information.

The views and opinions in the commentary were as of the report date, subject to change and may not reflect current views. They are not guarantees of performance or investment results and should not be taken as investment advice. Investment decisions reflect a variety of factors, and the managers reserve the right to change their views about individual stocks, sectors, and the markets at any time. As a result, the views expressed should not be relied upon as a forecast of the Fund's future investment intent. It should not be assumed that any investment will be profitable or will equal the performance of any securities or any sectors mentioned herein. The information does not constitute a recommendation to buy or sell any securities mentioned.