TOP

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

-19.87%

YTD Return

(as of 08/09/2022)

$13.82

NAV

(as of 08/09/2022)

-0.01

1 Day NAV Change

(as of 08/09/2022)

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 $256.77 million (07/31/2022)
Currency USD
Ticker MCDFX
Cusip 577-125-305
Portfolio Turnover 68.3%
Benchmark MSCI China Index
Geographic Focus China - China includes its administrative and other districts, such as Hong Kong
Fees & Expenses
Gross Expense Ratio 1.12%

Performance

  • Monthly
  • Quarterly
  • Calendar Year
  • data_graph_selected Created with Sketch.
  • bar_graph_selected Created with Sketch.
As of 07/31/2022
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
-5.65% 1.79% -18.65% -19.66% 0.35% 3.72% 8.16% 7.80%
MSCI China Index
-9.44% -2.29% -19.58% -28.23% -3.52% -1.42% 4.50% 2.76%
As of 06/30/2022
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
6.83% 3.22% -13.78% -23.47% 2.00% 5.34% 8.84% 8.36%
MSCI China Index
6.63% 3.50% -11.19% -31.70% -0.44% 2.29% 5.69% 3.59%
For the years ended December 31st
Name 2021 2020 2019 2018 2017 2016 2015 2014 2013 2012
Matthews China Dividend Fund - MCDFX
MCDFX
-0.49% 24.22% 15.00% -9.98% 37.69% 5.70% 9.54% 0.93% 13.35% 27.81%
MSCI China Index
-21.64% 29.67% 23.66% -18.75% 54.33% 1.11% -7.62% 8.26% 3.96% 23.10%

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 06/30/2022)

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 06/30/2022)
1.47% 30-Day SEC Yield
1.47% 30-Day SEC Yield (excluding expense waiver)
2.93% Dividend Yield

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

Ratings

  • OVERALL
  • out of 91 funds
  • 3 YEAR
  • out of 91 funds
  • 5 YEAR
  • out of 72 funds
  • 10 YEAR
  • out of 50 funds
  • 1 YEAR
  • 2nd
  • 36 out of 106 funds
  • 3 YEAR
  • 3rd
  • 49 out of 81 funds
  • 5 YEAR
  • 2nd
  • 31 out of 66 funds
  • 10 YEAR
  • 1st
  • 10 out of 45 funds
  • SINCE INCEPTION
  • 1st
  • 3 out of 37 funds

Ratings agency calculation methodology

Portfolio Managers

Sherwood  Zhang, CFA photo
Sherwood Zhang, CFA

Lead Manager

Yu  Zhang, CFA photo
Yu Zhang, CFA

Co-Manager

S. Joyce Li, CFA photo
S. Joyce Li, CFA

Co-Manager

Portfolio Characteristics

(as of 06/30/2022)
Fund Benchmark
Number of Positions 39 717
Weighted Average Market Cap $70.0 billion $131.9 billion
Active Share 84.5 n.a.
P/E using FY1 estimates 11.0x 11.0x
P/E using FY2 estimates 9.4x 9.8x
Price/Cash Flow 7.0 6.5
Price/Book 1.3 1.5
Return On Equity 15.7 11.7
EPS Growth (3 Yr) 15.2% 5.8%

Sources: Factset Research Systems, Inc.

Risk Metrics (3 Yr Return)

(as of 06/30/2022)
2.37%
Alpha
0.78
Beta
91.12%
Upside Capture
86.89%
Downside Capture
0.08
Sharpe Ratio
0.24
Information Ratio
10.36%
Tracking Error
69.30

Fund Risk Metrics are reflective of Investor share class.

Sources: Zephyr StyleADVISOR

Top 10 Holdings

(as of 07/31/2022)
Name Sector % Net Assets
Tencent Holdings, Ltd. Communication Services 7.6
CITIC Telecom International Holdings, Ltd. Communication Services 4.5
Postal Savings Bank of China Co., Ltd. Financials 4.1
Chongqing Changan Automobile Co., Ltd. Consumer Discretionary 3.4
CSPC Pharmaceutical Group, Ltd. Health Care 3.2
Tsingtao Brewery Co., Ltd. Consumer Staples 3.0
Yangzijiang Shipbuilding Holdings, Ltd. Industrials 2.8
Yum China Holdings, Inc. Consumer Discretionary 2.8
China Merchants Bank Co., Ltd. Financials 2.7
China Suntien Green Energy Corp., Ltd. Energy 2.7
TOTAL 36.8

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 06/30/2022)
  • Sector Allocation
  • Asset Type Breakdown
  • Market Cap Exposure
  • China Exposure
Sector Fund Benchmark Difference
Consumer Discretionary 23.3 30.8 -7.5
Communication Services 13.3 18.1 -4.8
Industrials 12.1 5.6 6.5
Financials 11.8 15.5 -3.7
Health Care 10.4 5.9 4.5
Consumer Staples 9.1 5.9 3.2
Materials 5.8 3.5 2.3
Information Technology 5.6 5.9 -0.3
Energy 2.6 2.3 0.3
Real Estate 2.2 3.9 -1.7
Utilities 0.0 2.6 -2.6
Cash and Other Assets, Less Liabilities 3.8 0.0 3.8

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 96.2
Cash and Other Assets, Less Liabilities 3.8
Equity market cap of issuer Fund Benchmark Difference
Mega Cap (over $25B) 38.2 66.1 -27.9
Large Cap ($10B-$25B) 18.5 19.7 -1.2
Mid Cap ($3B-$10B) 19.1 13.2 5.9
Small Cap (under $3B) 20.5 0.9 19.6
Cash and Other Assets, Less Liabilities 3.8 0.0 3.8
China Exposure Portfolio Weight
SAR (Hong Kong) 27.9
H Shares 24.9
A Shares 16.2
China-affiliated corporations (CAC) 10.4
Overseas Listed Companies (OL) 9.1
B Shares 7.7
Cash and Other Assets, Less Liabilities 3.8

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)
06/27/2022 06/28/2022 $0.41693 $0.00000 $0.00000 $0.41693 2.8% N.A.
12/14/2021 12/15/2021 $0.10775 $0.11879 $1.23175 $1.45829 7.6% N.A.
06/28/2021 06/29/2021 $0.37761 $0.00000 $0.00000 $0.37761 1.7% 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, 2022

For the first half of 2022, the Matthews China Dividend Fund returned -13.78% (Investor Class) and -13.68% (Institutional Class), while its benchmark, the MSCI China Index, returned -11.19% over the same period. For the quarter ending June 30, 2022, the Fund returned 3.22% (Investor Class) and 3.28% (Institutional Class), while the benchmark returned 3.50%.

Market Environment:

Many events have shaped the global equity markets in the first half of the year: the Russia-Ukraine war and the resulting higher oil price; higher inflation globally; and the interest rate decisions of the U.S. Federal Reserve. Chinese equities markets, however, both onshore and offshore, have traded very much in tandem with China’s approach to managing the COVID virus. Earlier in the year, when investors had the impression that China might gradually phase out its strict COVID policy, Chinese equities enjoyed a small rally. Then Shanghai entered a prolonged, strict lockdown and that drove markets into free fall.

When President Xi Jinping reiterated China’s economic growth target at the BRICS Summit in late June, Chinese equities staged a strong rally from the bottom. In addition, there was speculation that the Chinese government might push more favorable policies toward the Hong Kong market in celebration of the island’s 25th anniversary of returning to China.

Outside of China, the Fed aggressively raised rates by 75 basis points (0.75%) in June due to persistent inflation pressure and many Asian currencies have depreciated as a result, particularly the Japanese yen. While the Chinese yuan also saw depreciation against U.S. dollar it has remained very strong against other currencies. These currency dynamics could become a headwind for China’s exports down the road.

Performance Contributors and Detractors:

During the first half of the year, the Fund’s underweight in the consumer discretionary sector and our stock selection was the biggest detractor to relative performance. Our stock selection in the energy sector was the second-largest detractor. Many oil and coal companies performed well during the first half while our single energy holding, China Suntien Green Energy, a gas pipeline and wind power operator, suffered from low utilization rates due to reduced industrial activities. On the flip side, our stock selection in the information technology (IT) sector was the biggest contributor to performance in the first half.

At the individual stock level, Yangzijiang Shipbuilding was the biggest contributor to performance during the first six months of 2022. The company has fulfilled its promise to investors to separately list its financial investments business and continues to win new vessel orders with more complex technical requirements and higher margins. Yadea Group, a leading e-motorcycle maker, was the second-largest contributor as the company bounced back after giving the market fairly bullish guidance as it seeks to invest and take share in overseas markets. Bank of China (Hong Kong) was also a top contributor as the market expects the lender to benefit from Hong Kong’s rising interest rate, which is tied closely to the Fed’s, and from better credit demand due to post-pandemic recovery.

On the other hand, Tencent, the internet giant, was the biggest detractor from performance as it continues to be haunted by weak first-quarter results and an uncertain regulatory environment. It experienced more negative sentiment when Naspers, its largest shareholder, announced it will gradually sell its stake. China Suntien was a big detractor as was China Education Group, a leading private higher-education operator, and we continue to closely monitor its performance and the regulatory environment.

Notable Portfolio Changes:

We made a switch among Chinese banks during the second quarter. As China Merchants Bank’s former president was placed under investigation by China’s anti-corruption watchdog, the bank’s stock price suffered a heavy sell-off. We believe the probe is not directly related to tenure at China Merchants Bank and the lender’s new president was internally selected which in our view signals the regulator and large shareholders remain confident in the bank’s controls. As China Merchants Bank’s valuation premium in relation to other Chinese lenders fell, we decided to take a position in the stock and sell our holding in PingAn Bank.

We also added Meituan to the portfolio as the food delivery platform continues to show its importance in China’s service economy amid the ongoing pandemic and related lockdowns. We also believe the company’s heavy losses in new businesses will narrow as the sector starts to focus more on profit and less on growth at all costs.

We exited our position in Uni-President China as the company’s food business is likely to suffer from higher soft-commodities prices because of the Russia-Ukraine war.

Outlook:

Although the Chinese economy has recovered some ground after the lifting of the mass lockdown in Shanghai, its growth is still way below full potential. However, there is a glimpse of hope that the Chinese government may turn more pragmatic in terms of its COVID policies and place more importance on economic growth especially after it halved its travel-quarantine days requirement. In addition, the People’s Bank of China is the only major central bank in the world that has the capacity and the willingness to loosen its monetary policy. It is on a different trajectory to the Fed. Thus, we continue to be optimistic that the Chinese economy can swiftly shift back to growth mode if the policy tailwinds are in place. In the meantime, the stringent COVID policy poses major risks to a sustainable market rally.

View the Fund’s Top 10 holdings as of June 30, 2022. Current and future holdings are subject to change and risk.

 

Average Annual Total Returns - MCDFX as of 06/30/2022
1YR 3YR 5YR 10YR Since Inception Inception Date
-23.47% 2.00% 5.34% 8.84% 8.36% 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 1.12%
Yields as of 06/30/2022
30-Day SEC Yield 1.47%
30-Day SEC Yield (excluding expense waiver) 1.47%
Dividend Yield 2.93%

The 30-Day SEC Yield represents net investment income earned by the Fund over the 30-day period ended 06/30/2022, 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.