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)
Total return with an emphasis on providing current income.
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.
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.
Inception Date | 11/30/2009 | |
Fund Assets | $163.06 million (08/31/2023) | |
Currency | USD | |
Ticker | MCDFX | |
Cusip | 577-125-305 | |
Portfolio Turnover | 67.1% | |
Benchmark | MSCI China Index | |
Geographic Focus | China - China includes its administrative and other districts, such as Hong Kong |
Gross Expense Ratio | 1.20% |
Objective | Total return with an emphasis on providing current income. |
Strategy | Under normal circumstances, the Matthews China Dividend Fund seeks to achieve its investment objective by investing at least 80% of its net assets, which include borrowings for investment purposes, in dividend-paying equity securities of companies located in China. The Fund may also invest in convertible debt and equity securities. The Fund seeks to provide a level of current income that is higher than the yield generally available in Chinese equity markets over the long term. |
Risks |
Investments in Asian securities may involve risks such as social and political instability, market illiquidity, exchange-rate fluctuations, a high level of volatility and limited regulation. Investing in emerging markets involves different and greater risks, as these countries are substantially smaller, less liquid and more volatile than securities markets in more developed markets. In addition, investments in a single-country fund, which is considered a non-diversified fund, may be subject to a higher degree of market risk than diversified funds because of concentration in a specific country.
There is no guarantee that the Fund or the companies in its portfolio will pay or continue to pay dividends.
The risks associated with investing in the Fund can be found in the prospectus |
Source: BNY Mellon Investment Servicing (US) Inc. All performance is in US$.
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.
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.
30-Day SEC Yield | 1.76% |
30-Day SEC Yield (excluding expense waiver) | 1.76% |
Dividend Yield | 3.32% |
30-Day SEC Yield Source: BNY Mellon Investment Servicing (US) Inc.
Lead Manager
Portfolio Manager
Sherwood Zhang is a Portfolio Manager at Matthews and manages the firm’s China Dividend and China A-Shares Strategies and co-manages the China and Asia ex Japan Total Return Equity Strategies. Prior to joining Matthews in 2011, Sherwood was an analyst at Passport Capital from 2007 to 2010, where he focused on such industries as property and basic materials in China as well as consumer-related sectors. Before earning his MBA in 2007, Sherwood served as a Senior Treasury Officer for Hang Seng Bank in Shanghai and Hong Kong, and worked as a Foreign Exchange Trader at Shanghai Pudong Development Bank in Shanghai. He received his MBA from the University of Maryland and his Bachelor of Economics in Finance from Shanghai University. Sherwood is fluent in Mandarin and speaks conversational Cantonese.
Lead Manager
Portfolio Manager
Winnie Chwang is a Portfolio Manager at Matthews and manages the firm’s China Small Companies and China Dividend Strategies and co-manages the China, Pacific Tiger and Asia Dividend Strategies. She joined the firm in 2004 and has built her investment career at the firm. Winnie earned an MBA from the Haas School of Business and received her B.A. in Economics with a minor in Business Administration from the University of California, Berkeley. She is fluent in Mandarin and conversational in Cantonese.
Co-Manager
Portfolio Manager
Elli Lee is a Portfolio Manager at Matthews and manages the firm’s Korea Strategy and co-manages the Asia Dividend, China Dividend and Asian Growth and Income Strategies. Prior to joining Matthews in 2016, Elli worked at Bank of America Merrill Lynch for 10 years, most recently in Korean Equity Sales and previously as an Equity Research Analyst covering South Korea’s engineering, construction, steel and education sectors. From 2003 to 2005, Elli was an Investor Relations Specialist at Hana Financial Group in Seoul. She earned a Master of Science in Global Finance from the Hong Kong University of Science and Technology Business School and New York University Stern School of Business, and received a B.A. in Economics from Bates College. Elli is fluent in Korean.
Co-Manager
Portfolio Manager
Andrew Mattock is a Portfolio Manager at Matthews and manages the firm’s China, China Small Companies and China A-Share Strategies and co-manages the Pacific Tiger, China Dividend and Emerging Markets Equity Strategies. Prior to joining Matthews in 2015, he was a Fund Manager at Henderson Global Investors for 15 years, first in London and then in Singapore, managing Asia Pacific equities. Andrew holds a Bachelor of Business majoring in Accounting from ACU. He began his career at PricewaterhouseCoopers and qualified as a Chartered Accountant.
Sources: Factset Research Systems, Inc.
Fund Risk Metrics are reflective of Investor share class.
Sources: Zephyr StyleADVISOR
Top 10 holdings may combine more than one security from the same issuer and related depositary receipts.
Source: BNY Mellon Investment Servicing (US) Inc.
Sector data based on MSCI’s revised Global Industry Classification Standards. For more details, visit www.msci.com.
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.
Visit our Glossary of Terms page for definitions and additional information.
The MSCI All Country Asia ex Japan Index is a free float–adjusted market capitalization–weighted index of the stock markets of China, Hong Kong, India, Indonesia, Malaysia, Pakistan, Philippines, Singapore, South Korea, Taiwan and Thailand.
The MSCI All Country Asia Pacific Index is a free float–adjusted market capitalization–weighted index of the stock markets of Australia, China, Hong Kong, India, Indonesia, Japan, Malaysia, New Zealand, Pakistan, Philippines, Singapore, South Korea, Taiwan and Thailand.
The MSCI China Index is a free float-adjusted market capitalization-weighted index of Chinese equities that includes H shares listed on the Hong Kong exchange, B shares listed on the Shanghai and Shenzhen exchanges, Hong Kong-listed securities known as Red chips (issued by entities owned by national or local governments in China) and P Chips (issued by companies controlled by individuals in China and deriving substantial revenues in China) and foreign listings (e.g. ADRs).
The MSCI China All Shares Index captures large and mid-cap representation across China A shares, B shares, H shares, Red chips (issued by entities owned by national or local governments in China), P chips (issued by companies controlled by individuals in China and deriving substantial revenues in China), and foreign listings (e.g. ADRs). The index aims to reflect the opportunity set of China share classes listed in Hong Kong,Shanghai, Shenzhen and outside of China.
The MSCI Emerging Markets (EM) Asia Index is a free float-adjusted market capitalization weighted index of the stock markets of China, India, Indonesia, Malaysia, Pakistan, Philippines, South Korea, Taiwan and Thailand. The MSCI Emerging Markets Index is a free float-adjusted market capitalization-weighted index of the stock markets of Argentina, Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Malaysia, Mexico, Pakistan, Peru, Philippines, Poland, Qatar, Russia, Saudi Arabia, South Africa, South Korea, Taiwan, Thailand, Turkey and United Arab Emirates.
The MSCI Emerging Markets Index is a free float-adjusted market capitalization-weighted index of the stock markets of Argentina, Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Malaysia, Mexico, Pakistan, Peru, Philippines, Poland, Qatar, Russia, Saudi Arabia, South Africa, South Korea, Taiwan, Thailand, Turkey and United Arab Emirates.
The MSCI Emerging Markets ex China Index is a free float-adjusted market capitalization-weighted index that captures large and mid cap representation across 23 of the 24 Emerging Markets (EM) countries excluding China: Brazil, Chile, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Kuwait, Malaysia, Mexico, Peru, Philippines, Poland, Qatar, Saudi Arabia, South Africa, Taiwan, Thailand, Turkey and United Arab Emirates.
The MSCI Emerging Markets Small Cap Index is a free float-adjusted market capitalization weighted small cap index of the stock markets of Argentina, Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungry, India, Indonesia, Kuwait, Malaysia, Mexico, Pakistan, Peru, Philippines, Poland, Qatar, Russia, Saudi Arabia, South Africa, South Korea, Taiwan Thailand, Turkey and United Arab Emirates.
The S&P Bombay Stock Exchange 100 (S&P BSE 100) Index is a free float–adjusted market capitalization–weighted index of 100 stocks listed on the Bombay Stock Exchange.
The MSCI Japan Index is a free float–adjusted market capitalization–weighted index of Japanese equities listed in Japan.
The Korea Composite Stock Price Index (KOSPI) is a market capitalization–weighted index of all common stocks listed on the Korea Stock Exchange.
The MSCI All Country Asia ex Japan Small Cap Index is a free float–adjusted market capitalization–weighted small cap index of the stock markets of China, Hong Kong, India, Indonesia, Malaysia, Pakistan, Philippines, Singapore, South Korea, Taiwan and Thailand.
The MSCI China Small Cap Index is a free float-adjusted market capitalization-weighted small cap index of the Chinese equity securities markets, including H shares listed on the Hong Kong exchange, B shares listed on the Shanghai and Shenzhen exchanges,Hong Kong-listed securities known as Red Chips (issued by entities owned by national or local governments in China) and P Chips (issued by companies controlled by individuals in China and deriving substantial revenues in China), and foreign listings (e.g., ADRs).
The MSCI India Index is a free float-adjusted market capitalization-weighted index of Indian equities listed in India.
The MSCI Korea Index is a free float-adjusted market capitalization-weighted index of Korean equities listed in Korea.
Indexes are for comparative purposes only and it is not possible to invest directly in an index.
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.
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
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
Yields as of 06/30/2023
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.