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Matthews Asian Growth and Income Fund
MACSX

Snapshot
  • Seeks upside participation while aiming to provide some downside protection in Asia ex Japan
  • Utilize income-paying equities and convertible bonds to help mitigate downside risk and volatility
  • Offers a relatively stable means of participating in Asia’s long-term growth

09/12/1994

Inception Date

-17.83%

YTD Return

(as of 12/01/2022)

$13.13

NAV

(as of 12/01/2022)

+0.03

1 Day NAV Change

(as of 12/01/2022)

Objective

Long-term capital appreciation with some current income.

Strategy

Under normal circumstances, the Matthews Asian Growth and Income 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 common stock, preferred stock and other equity securities, and convertible securities as well as fixed-income securities, of any duration or quality, of companies located in Asia. The Fund attempts to offer investors a relatively stable means of participating in a portion of the Asian region’s growth prospects, while providing some downside protection, in comparison to a portfolio that invests purely in common stocks. The strategy of owning convertible bonds and dividend-paying equities is designed to help the Fund to meet its investment objective while helping to reduce the volatility of its portfolio.

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 and frontier markets involves different and greater risks, as these countries are substantially smaller, less liquid and more volatile than securities markets in more developed markets.

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

Fund Facts
Inception Date 09/12/1994
Fund Assets $673.90 million (10/31/2022)
Currency USD
Ticker MACSX
Cusip 577-130-206
Portfolio Turnover 37.9%
Benchmark MSCI All Country Asia ex Japan Index
Geographic Focus Asia - Consists of all countries and markets in Asia, including developed, emerging, and frontier countries and markets in the Asian region
Fees & Expenses
Gross Expense Ratio 1.07%

Performance

  • Monthly
  • Quarterly
  • Calendar Year
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As of 10/31/2022
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asian Growth and Income Fund - MACSX
09/12/1994
MACSX
-6.04% -18.39% -30.85% -31.27% -5.75% -2.74% 0.70% 7.18%
MSCI All Country Asia ex Japan Index
-6.09% -18.02% -32.03% -33.74% -4.51% -3.05% 2.70% 3.44%
As of 09/30/2022
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asian Growth and Income Fund - MACSX
09/12/1994
MACSX
-11.04% -13.47% -26.40% -24.82% -2.65% -1.20% 1.41% 7.44%
MSCI All Country Asia ex Japan Index
-12.73% -13.69% -27.62% -28.48% -1.03% -0.91% 3.32% 3.69%
For the years ended December 31st
Name 2021 2020 2019 2018 2017 2016 2015 2014 2013 2012
Matthews Asian Growth and Income Fund - MACSX
MACSX
0.04% 16.00% 17.26% -10.96% 21.85% 1.34% -4.50% -0.65% 4.83% 26.90%
MSCI All Country Asia ex Japan Index
-4.46% 25.36% 18.52% -14.12% 42.08% 5.76% -8.90% 5.11% 3.34% 22.70%

MSCI AC Asia ex Japan Index since inception value calculated from 8/31/94.

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 09/30/2022)

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 09/30/2022)
2.02% 30-Day SEC Yield
2.02% 30-Day SEC Yield (excluding expense waiver)
3.48% Dividend Yield

Dividend Yield (trailing) Source: FactSet Research Systems, Bloomberg, Matthews
30-Day SEC Yield Source: BNY Mellon Investment Servicing (US) Inc.

Ratings

  • OVERALL
  • out of 52 funds
  • 3 YEAR
  • out of 52 funds
  • 5 YEAR
  • out of 47 funds
  • 10 YEAR
  • out of 35 funds
  • 1 YEAR
  • 1st
  • 8 out of 36 funds
  • 3 YEAR
  • 3rd
  • 25 out of 35 funds
  • 5 YEAR
  • 3rd
  • 21 out of 31 funds
  • 10 YEAR
  • 4th
  • 19 out of 21 funds
  • SINCE INCEPTION
  • 1st
  • 1 out of 5 funds

Ratings agency calculation methodology

Portfolio Managers

Robert J. Horrocks, PhD photo
Kenneth  Lowe, CFA photo
Kenneth Lowe, CFA

Lead Manager

Satya  Patel photo
Satya Patel

Co-Manager

Siddharth  Bhargava photo
Siddharth Bhargava

Co-Manager

Portfolio Characteristics

(as of 09/30/2022)
Fund Benchmark
Number of Positions 49 1,205
Weighted Average Market Cap $79.3 billion $86.3 billion
Active Share 78.0 n.a.
Price/Cash Flow 9.9 6.3
Price/Book 2.0 1.4
Return On Equity 19.6 14.6
EPS Growth (3 Yr) 6.5% 11.4%

Sources: Factset Research Systems, Inc.

Risk Metrics (3 Yr Return)

(as of 09/30/2022)
-2.00%
Alpha
0.84
Beta
71.22%
Upside Capture
86.67%
Downside Capture
-0.20
Sharpe Ratio
-0.29
Information Ratio
5.51%
Tracking Error
91.43

Fund Risk Metrics are reflective of Investor share class.

Sources: Zephyr StyleADVISOR

Top 10 Holdings

(as of 10/31/2022)
Name Sector Country % Net Assets
Taiwan Semiconductor Manufacturing Co., Ltd. Information Technology Taiwan 7.0
AIA Group, Ltd. Financials China/Hong Kong 4.2
Samsung Electronics Co., Ltd. Information Technology South Korea 3.8
Tencent Holdings, Ltd. Communication Services China/Hong Kong 3.6
Housing Development Finance Corp., Ltd. Financials India 3.6
United Overseas Bank, Ltd. Financials Singapore 2.6
ESR Group, Ltd., Cnv., 1.500%, 09/30/2025 Real Estate China/Hong Kong 2.4
Macquarie Korea Infrastructure Fund Financials South Korea 2.4
Pharmaron Beijing Co., Ltd., Cnv., 0.000%, 06/18/2026 Health Care China/Hong Kong 2.3
JD.com, Inc. Consumer Discretionary China/Hong Kong 2.3
TOTAL 34.2

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 09/30/2022)
  • Sector Allocation
  • Country Allocation
  • Asset Type Breakdown
  • Market Cap Exposure
Sector Fund Benchmark Difference
Information Technology 20.2 20.8 -0.6
Financials 18.7 21.1 -2.4
Consumer Discretionary 15.4 15.1 0.3
Communication Services 10.3 9.7 0.6
Industrials 10.2 6.7 3.5
Real Estate 8.0 4.1 3.9
Health Care 6.8 3.9 2.9
Consumer Staples 5.8 5.8 0.0
Utilities 3.4 3.3 0.1
Materials 0.0 5.5 -5.5
Energy 0.0 3.9 -3.9
Cash and Other Assets, Less Liabilities 1.2 0.0 1.2

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

Country Fund Benchmark Difference
China/Hong Kong 49.2 43.3 5.9
India 11.3 17.5 -6.2
Taiwan 10.6 15.6 -5.0
South Korea 8.2 12.2 -4.0
Singapore 7.4 3.9 3.5
France 3.7 0.0 3.7
United States 1.9 0.0 1.9
Indonesia 1.8 2.5 -0.7
Thailand 1.7 2.4 -0.7
Philippines 1.5 0.8 0.7
Australia 1.5 0.0 1.5
Malaysia 0.0 1.7 -1.7
Cash and Other Assets, Less Liabilities 1.2 0.0 1.2

Not all countries are included in the benchmark index(es).

Asset Type Fund
Common Equities and ADRs 91.1
Convertible Bonds 7.8
Cash and Other Assets, Less Liabilities 1.2
Equity market cap of issuer Fund Benchmark Difference
Mega Cap (over $25B) 45.9 56.1 -10.2
Large Cap ($10B-$25B) 13.9 21.0 -7.1
Mid Cap ($3B-$10B) 29.7 19.3 10.4
Small Cap (under $3B) 9.4 3.5 5.9
Cash and Other Assets, Less Liabilities 1.2 0.0 1.2

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 $0.07829 $0.00000 $0.00000 $0.07829 0.6% N.A.
12/14/2021 12/15/2021 $0.07977 $0.40825 $1.37352 $1.86154 10.4% N.A.
06/28/2021 06/29/2021 $0.12445 $0.00000 $0.00000 $0.12445 0.7% 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 September 30, 2022

For the quarter ending September 30, 2022, the Matthews Asian Growth and Income Fund returned -13.47% (Investor Class) and -13.42% (Institutional Class), while its benchmark, the MSCI All Country Asia ex Japan Index, returned -13.69%.

Market Environment:

The third quarter of the year witnessed gyrations in public equities as a bear market rally sparked by the narrative of the global economy reaching peak inflation was soon brought back down to earth. Markets swiftly fell through previous lows as core inflation data surprised to the upside with the Fed having to tighten monetary policy aggressively. Sustained inflation, alongside weakening economic growth expectations, leaves the prospect of stagflation and a recession as solid probabilities. Exacerbating these issues are rising geopolitical tensions that appear to have yet to reach a climax between China and the U.S. A combination of these factors has severely impacted asset values in emerging markets as the dollar has strengthened, the cost of capital has risen, and future export growth has been hampered. China was the region’s weakest market during the quarter, followed by the export and technology dominated markets of South Korea and Taiwan. India and Indonesia rose on superior growth prospects.

Performance Contributors and Detractors:

From a country perspective, the portfolio’s stock selection and underweight in India was the biggest detractor from relative performance. Our larger exposure to more defensive areas of the country’s market struggled to keep pace with India’s cyclical sectors. These sectors rose as India—one of highest growth economies in broader emerging markets—was a place for many investors to allocate capital to amid the faltering market of China. On the flip side, our stock selection in China was the biggest contributor to relative performance due in part to a lower exposure to high-growth stocks in the market, such as technology, health care and electric vehicles.

At the sector level, stock selection in consumer staples hindered performance as these holdings were exposed to China where a weak property market and the continuation of a zero-COVID policy have hurt consumption trends. On the other hand, stock selection in health care, consumer discretionary and information technology (IT) were the biggest contributors.

At the stock level, the biggest detractors to performance came from large caps including Taiwan Semiconductor Manufacturing Co. (TSMC), Tencent Holdings and AIA Group. TSMC declined as end-market demand for chips softens, putting future capacity utilization and upcoming price increases at risk. Tencent is suffering from a weak domestic advertising backdrop given the economic malaise in China related to the government’s zero-COVID policy. This has also affected AIA Group as a lack of mobility weighs on the ease with which agents can sell higher margin protection-oriented life insurance products. Property management company CIFI Ever Sunshine Services fell significantly as its parent company is under liquidity stress and there are concerns of contagion. It should be noted that the firm’s operational exposure to its parent is limited to around 20% of the gross floor area that it manages.

Given the strong market performance in India, the portfolio’s largest contributor came from consumer durables company Crompton Greaves Consumer Electricals. The maker of fans, pumps, lighting and other appliances delivered robust top-line growth of over 50% during the quarter and there’s hope that this can continue with the integration of newly acquired Butterfly as well as Crompton’s entry into built-in appliances such as ovens, hobs and microwaves. Fellow Indian holding Computer Age Management Services also gained despite a soft quarter as the leading registrar and transfer agent for mutual funds in India is expected to be a double-digit grower as financial penetration in the country rises. Outside India, gold miner Northern Star Resources rebounded from lows as defensive stocks gained amid fears returning to the markets and the company’s announcement of a $300-million share buyback.

Notable Portfolio Changes:

During the quarter we added Haier Biomedical to the portfolio. The Chinese company is a global player within cold chain storage solutions for the medical industry including for biological samples, blood, vaccines, and medical supplies. We expect to see double-digit growth as the company offers a high-quality product that can take advantage of the increase in construction and digitalization of health-care infrastructure in labs, vaccination stations and blood storage. Further, management is pushing into newer products such as centrifuges and biosafety cabinets that can potentially provide another leg of growth. Haier Biomedical is a high margin business with solid returns and trades at a relatively attractive 25x FY23 earnings. To fund this position, we exited Chinese auto-parts maker Minth Group. The decorative, trim and battery-housing parts manufacturer has been struggling with weak demand, especially in China, and this has been compounded by input-cost pressure in areas such as plastics and logistics costs. These factors have hurt margins while ongoing management tumult creates uncertainty in the company’s strategic outlook. We also exited a holding in gold miner Northern Star Resources. The company has good assets, a solid history of production expansion and a well-respected management team. However, declining gold prices against a backdrop of rising real interest rates alongside cost pressures driven by the ongoing inflationary environment is putting margins under pressure. As other equities declined, the holding was sold to fund superior ideas.

Outlook:

A rising dollar and elevated cost of capital has not been helped by soft domestic growth in Asia that has struggled to counteract this. China in particular has delivered underwhelming performance as its zero-COVID policy, weak property market and elevated debt levels weigh on its economy. It is, however, a geography that has policy flexibility as inflation is relatively well contained. There is also hope that there may be some respite from the self-inflicted wounds of its COVID and property policies. In Southeast Asia, recovery had been slow entering 2022 but reopenings across the region may now increase mobility and enhance economic activity. Importantly, valuations across Asia are now appealing at 11x P/E following a lengthy bear market. Earnings expectations have been reduced to a more realistic 8% for 2023 and global investor enthusiasm for the asset class appears to be low. These are reasons to be constructive. At a strategy level, we believe that quality companies with strong cash flow generation, relatively visible earnings growth and some form of income are well placed to weather the ongoing macroeconomic challenges. We also think that many of these businesses are currently on sale and have the potential to deliver attractive returns for the patient investor over the medium term.

Top 10 holdings as of September 30, 2022. Current and future holdings are subject to change and risk.

Average Annual Total Returns - MACSX as of 09/30/2022
1YR 3YR 5YR 10YR Since Inception Inception Date
-24.82% -2.65% -1.20% 1.41% 7.44% 09/12/1994

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 1.07%
Yields as of 09/30/2022
30-Day SEC Yield 2.02%
30-Day SEC Yield (excluding expense waiver) 2.02%
Dividend Yield 3.48%

The 30-Day SEC Yield represents net investment income earned by the Fund over the 30-day period ended 09/30/2022, 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 and frontier markets involves different and greater risks, as these countries are substantially smaller, less liquid and more volatile than securities markets in more developed markets.

 

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.