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Matthews China Innovators Fund
MCSMX

Formerly known as the China Small Companies Fund.

Snapshot
  • Seeks alpha in fast-growing innovative companies in China
  • Invests in industries that are leveraged to China’s increasingly innovative and dynamic economy driven by fast growing domestic consumer demand
  • Tilt towards higher value-added growth sectors benefiting from innovation and capital efficiency

05/31/2011

Inception Date

4.81%

YTD Return

(as of 10/28/2026)

$11.99

NAV

(as of 10/28/2026)

+0.13

1 Day NAV Change

(as of 10/28/2026)

Objective

Long-term capital appreciation.

Strategy

Under normal circumstances, the Fund seeks to achieve its investment objective by investing at least 80% of its net assets, which include borrowings for investment purposes, in the common and preferred stocks of companies located in China that Matthews believes are innovators in their products, services, processes, business models, management, use of technology, or approach to creating, expanding or servicing their markets. China includes its administrative and other districts, such as Hong Kong. The Fund seeks to invest in companies capable of sustainable growth based on the fundamental characteristics of those companies, including balance sheet information; number of employees; size and stability of cash flow; management’s depth, adaptability and integrity; product lines; marketing strategies; corporate governance; and financial health.

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, because the fund concentrates its investments in a single-country, its share price may be more volatile, and more affected by political, economic and other events in the country in which it invests than that of funds that are not as geographically concentrated. Non-diversified funds may be more susceptible to any single economic, political or regulatory event than a diversified fund because a higher percentage of a fund’s assets may be invested in the securities of a limited number of issuers.

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

Fund Facts
Inception Date 05/31/2011
Fund Assets $76.74 million (09/30/2026)
Currency USD
Ticker MCSMX
Cusip 577-125-404
Benchmark MSCI China All Shares Index MSCI China IndexMSCI China Small Cap Index
Geographic Focus China - China includes its administrative and other districts, such as Hong Kong
Fees & Expenses
Gross Expense Ratio 1.57%
Net Expense Ratio 1.40%

Performance

  • Monthly
  • Quarterly
  • Calendar Year
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As of 09/30/2026
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews China Innovators Fund - MCSMX
05/31/2011
MCSMX
-5.21% -25.48% 19.41% 14.87% 13.74% -2.91% 9.51% 6.61%
MSCI China All Shares Index
-5.09% -2.74% -7.58% -11.46% 10.26% -1.62% 3.81% n.a.
MSCI China Index
-4.56% 3.72% -11.75% -18.23% 9.96% -1.93% 3.52% 2.83%
MSCI China Small Cap Index
-3.32% -0.36% -13.72% -24.71% 6.58% -8.37% -1.53% -1.23%
As of 09/30/2026
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews China Innovators Fund - MCSMX
05/31/2011
MCSMX
-5.21% -25.48% 19.41% 14.87% 13.74% -2.91% 9.51% 6.61%
MSCI China All Shares Index
-5.09% -2.74% -7.58% -11.46% 10.26% -1.62% 3.81% n.a.
MSCI China Index
-4.56% 3.72% -11.75% -18.23% 9.96% -1.93% 3.52% 2.83%
MSCI China Small Cap Index
-3.32% -0.36% -13.72% -24.71% 6.58% -8.37% -1.53% -1.23%
For the years ended December 31st
Name 2025 2024 2023 2022 2021 2020 2019 2018 2017 2016
Matthews China Innovators Fund - MCSMX
MCSMX
28.83% 2.82% -17.51% -31.26% -3.59% 82.52% 35.41% -17.68% 53.88% -2.35%
MSCI China All Shares Index (USD)
29.22% 16.67% -11.35% -23.47% -12.80% 33.61% 27.87% -23.15% 41.43% -7.69%
MSCI China Index (USD)
31.43% 19.68% -11.04% -21.80% -21.64% 29.67% 23.66% -18.75% 54.33% 1.11%
MSCI China Small Cap Index (USD)
35.34% 6.82% -24.82% -24.77% -6.26% 27.21% 6.63% -19.53% 24.62% -5.95%
Effective April 30, 2026, in connection with changes to the Fund’s name from China Small Companies Fund to China Innovators Fund and principal investment strategies, the primary benchmark was changed from the MSCI China Small Cap Index to the MSCI China All Shares Index.

Unusually high returns may not be sustainable. 

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 09/30/2026)

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.

Ratings

  • OVERALL
  • out of 70 funds
  • 3 YEAR
  • out of 70 funds
  • 5 YEAR
  • out of 64 funds
  • 10 YEAR
  • out of 37 funds

Ratings agency calculation methodology

Portfolio Managers

Tiffany  Hsiao, CFA photo

Portfolio Characteristics

(as of 09/30/2026)
Fund Benchmark
Number of Positions 43 580
Weighted Average Market Cap $52.3 billion $129.6 billion
Active Share 93.2 n.a.
P/E using FY1 estimates 17.4x 12.0x
P/E using FY2 estimates 13.8x 10.7x
Price/Cash Flow 17.4 8.2
Price/Book 4.1 1.6
Return On Equity 19.2 14.7
EPS Growth (3 Yr) 22.2% 16.0%

Sources: Factset Research Systems, Inc.

Risk Metrics (3 Yr Return)

(as of 09/30/2026)
6.21%
Alpha
0.96
Beta
78.52%
Upside Capture
62.43%
Downside Capture
0.30
Sharpe Ratio
0.15
Information Ratio
23.34%
Tracking Error
40.50
R²

Fund Risk Metrics are reflective of Investor share class.

Source: FactSet Research Systems

Top 10 Holdings

(as of 09/30/2026)
Name Sector % Net Assets
ACM Research, Inc. Information Technology 5.2
SITC International Holdings Co., Ltd. Industrials 5.2
Hongfa Technology Co Ltd. Industrials 4.7
NetEase, Inc. Communication Services 4.4
Beijing Huafeng Test & Control Technology Co., Ltd. Information Technology 4.4
Atour Lifestyle Holdings, Ltd. Consumer Discretionary 4.1
Luckin Coffee, Inc. Consumer Discretionary 3.9
Contemporary Amperex Technology Co Ltd Industrials 3.7
Lenovo Group, Ltd. Information Technology 3.4
Sichuan Kelun-Biotech Biopharmaceutical Co., Ltd. Health Care 3.3
TOTAL 42.3

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 09/30/2026)
  • Sector Allocation
  • Market Cap Exposure
  • China Exposure
Sector Fund Benchmark Difference
Information Technology 33.4 20.1 13.3
Industrials 28.4 8.7 19.7
Consumer Discretionary 15.7 14.8 0.9
Health Care 7.6 5.5 2.1
Communication Services 6.9 10.9 -4.0
Energy 0.8 3.5 -2.7
Materials 0.2 8.1 -7.9
Financials 0.0 20.3 -20.3
Consumer Staples 0.0 4.3 -4.3
Utilities 0.0 2.6 -2.6
Real Estate 0.0 1.1 -1.1
Cash and Other Assets, Less Liabilities 7.1 0.0 7.1

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

Equity market cap of issuer Fund Benchmark Difference
Mega Cap (over $25B) 29.9 65.1 -35.2
Large Cap ($10B-$25B) 19.6 21.6 -2.0
Mid Cap ($3B-$10B) 35.2 13.2 22.0
Small Cap (under $3B) 8.2 0.1 8.1
Cash and Other Assets, Less Liabilities 7.1 0.0 7.1

The Portfolio’s market cap exposure breakdown presented is used for comparison purposes and the definition of the capitalization breakdown is from MSCI.

The Fund defines Small Companies as companies with market capitalization no higher than the greater of US$5 billion or the market capitalization of the largest company included in the Fund's primary benchmark, the MSCI China Small Cap Index.

China Exposure Portfolio Weight
Mainland China Listed Companies 36.0
Hong Kong Listed Companies 32.6
ADR/GDR 12.4
Other 12.0
Cash and Other Assets, Less Liabilities 7.1

Mainland China listed companies includes A Share and B Shares. 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. B Shares are mainland Chinese companies listed on the Shanghai and Shenzhen stock exchanges, available to both Chinese and non-Chinese investors. ADRs are American Depositary Receipts and GDRs are Global Depositary Receipts. Hong Kong Listed Companies include SAR (Hong Kong) companies, China-affiliated corporations, and H Shares. SAR 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. H Shares are mainland Chinese companies listed on the Hong Kong exchange but incorporated in mainland China. Other represents Chinese companies listed in other countries or non-China companies with a majority of revenue coming from China such as Japan, Singapore, Taiwan and the United States or other non-China companies.

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)
12/16/2025 12/17/2025 $0.25489 $0.00000 $0.00000 $0.25489 2.2% N.A.
12/17/2024 12/18/2024 $0.12228 $0.00000 $0.00000 $0.12228 1.3% N.A.
12/13/2023 12/14/2023 $0.21127 $0.00000 $0.00000 $0.21127 2.4% N.A.
12/13/2022 12/14/2022 $0.19767 $0.00000 $0.00000 $0.19767 1.7% N.A.
12/14/2021 12/15/2021 $0.11673 $1.77913 $0.81209 $2.70795 14.0% N.A.

 

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, 2026

Summary

  • For the quarter ended September 30, 2026, the Matthews China Innovators Fund returned -25.48% (Investor Class) and -25.45% (Institutional Class) while its benchmark, the MSCI China All Shares Index, returned -2.74%. Year-to-date, the Fund returned 19.41% (Investor Class) and 19.53% (Institutional Class), while the benchmark returned -7.58%.
  • During the quarter, Information Technology was the main source of weakness, along with Industrials and Materials, as the AI hardware trade reversed and investors reduced exposure to semiconductors, electronics and advanced-manufacturing companies.
  • We reduced direct exposure to AI hardware and selected small-cap technology and materials holdings, while adding more innovation adopters across consumer, internet and health care industries during the quarter. These changes broadened the portfolio's sources of return while remaining consistent with our innovation enablers and adopters framework.

Market Review

Chinese equities delivered mixed results during the third quarter, with a wide gap between more resilient Hong Kong-listed shares and weaker mainland technology and growth companies.

The AI hardware trade reversed against a backdrop of higher global rates and continued U.S.-Iran tensions. The September 24 Trump-Xi summit signaled a constructive tone on trade and AI cooperation but failed to deliver substantive semiconductor export relief. Calls from U.S. senators for tighter AI export controls and proposed sanctions on Chinese optical-module suppliers added pressure to the sector, which gave back some strong gains from earlier in the year.

Onshore technology stocks also faced headwinds from tighter enforcement of investment mandate compliance and capital rotation ahead of the Chinese chipmaker, CXMT Corp.’s IPO created short-term pressure across the domestic semiconductor supply chain. Notably, CXMT overtook Tencent in market capitalization less than three weeks after its July listing.

Policy support remained robust but offered limited relief, despite China’s introduction of its first nationwide mortgage-interest subsidy for first-time buyers. Large-language-model companies fell more than 30% as competition intensified and U.S. developers pushed to restrict Chinese access to advanced models.

With mainland markets closed for Golden Week at the start of October, investors activity is expected to remain cautious ahead of third-quarter earnings amid persistent macro uncertainty.

3Q 2026 Performance

For the quarter ended September 30, 2026, the Matthews China Innovators Fund returned -25.48% (Investor Class) and 25.45% (Institutional Class), while its benchmark, the MSCI China All Shares Index, returned -2.74%. Performance was primarily attributable to stock selection. Information Technology was the main source of weakness, followed by Industrials and Material.

Information Technology

Information Technology was the largest detractor during the quarter. Kingboard Laminates, a manufacturer of copper-clad laminates used in printed circuit boards, declined approximately -70% following a strong earlier advance, as investors reassessed its valuation and exposure to AI-related demand. Wuxi NCE Power, a power-semiconductor manufacturer, declined about -46%. ACM Research, a supplier of wafer-cleaning and other semiconductor-manufacturing equipment fell -36%, while ASMPT, a semiconductor-assembly, packaging and surface-mount technology company, declined-34% amid weaker sentiment toward the semiconductor supply chain and continued export-control concerns. Beijing Huafeng Test & Control Technology, which develops automated test equipment used to assess semiconductor performance and quality, fell about -29% despite the company’s longer-term position in China’s domestic semiconductor-equipment market.

These declines were partly offset by gains in Lenovo and Unimicron Technology. Lenovo, a global personal-computer manufacturer with expanding exposure to servers, infrastructure solutions and AI-enabled devices, rose about 49%, supported by better-than-expected results and stronger demand for AI hardware and infrastructure solutions. Unimicron Technology, a manufacturer of advanced printed circuit boards and integrated-circuit substrates used in computing, communications and other electronic devices, gained about 35%, supported by exposure to higher-performance computing applications.

Industrials

Industrials also detracted, with performance varying across holdings. Acter Technology Integration, which provides engineering and facility-integration services for high-technology manufacturing plants and data centers, declined about -49% as investors reduced exposure to electronics-infrastructure companies. These losses were partly offset by SITC International, an Asia-focused container-shipping and logistics company, which rose about 57%, supported by resilient intra-Asian shipping demand. Robotechnik Intelligent Technology, a supplier of automation equipment for advanced manufacturing, including production-line systems for electronics and related industries, gained about 43%, while Sany Heavy Equipment International, a manufacturer of mining and industrial machinery, advanced about 26%.

Materials

Materials detracted, led by Jiangsu Boqian New Materials, which declined about -58% following strong first-half performance. The company manufactures nanometer-scale metal powders used in electronic components and other advanced-material applications. The decline coincided with a broader reduction of exposure to companies associated with the AI hardware buildout, despite the company’s ongoing investment in capacity and longer-term demand opportunities.

Positioning

During the quarter, the portfolio continued to evolve from a more concentrated semiconductor- and AI-hardware-oriented allocation toward a broader representation of innovation opportunities across China. SelectInformation Technology and Materials holdings were reduced following strong earlier performance and a less favorable near-term risk-reward profile. Capital was redeployed toward more attractively valued innovation adopters across Consumer Discretionary, Communication Services and Health Care, including businesses applying technology to consumer services, digital platforms and drug development. These changes broadened potential sources of return while remaining consistent with the Fund’s innovation enablers and adopters framework. Cash was maintained at a higher level to support selective investment as valuations adjusted.

Two new positions illustrate this approach. Luckin Coffee was added as a consumer technology adopter. The company combines a large store network with app-based ordering, digital customer engagement and a data-led approach to store expansion and product development. We believe this model provides exposure to the ongoing formalization and digitalization of China’s coffee market, while the company’s scale may support operating efficiency and product innovation.

Jiangsu Hengrui Pharmaceuticals was also initiated to increase exposure to domestically developed medicines and China’s expanding role in global pharmaceutical research. The company has a broad pipeline across oncology and other therapeutic areas and has entered licensing and collaboration agreements with global pharmaceutical partners. We believe its research platform, clinical-development capabilities and potential to monetize pipeline assets internationally provide a differentiated source of innovation exposure.

Kingboard Laminates was exited after a strong earlier share-price advance left the valuation less compelling and the position more exposed to changes in sentiment toward AI-related printed circuit board demand. The exit reduced concentration in hardware-linked beneficiaries and helped fund additions in areas with different demand drivers.

Outlook

The recent correction in China's innovation-related equities is viewed as having created attractive long-term entry points across several areas of the market. Near-term sentiment remains challenged by geopolitical uncertainty, export-control concerns and a soft domestic macroeconomic backdrop. China's late-September stimulus measures were generally viewed as designed to keep economic growth on target rather than deliver a broad demand revival, and disappointed markets that had hoped for more forceful intervention.

The economy increasingly resembles a K-shaped recovery, where companies with strong products, technology leadership and competitive advantages continue to gain market share, while weaker businesses remain under pressure. This environment reinforces the importance of disciplined stock selection and the need to be dynamic.

Recent on-the-ground research in Hong Kong, Shenzhen, Shanghai and Wuxi included meetings with portfolio companies, public and private peers, competitors and prospective investments across artificial intelligence, renewable energy, automation, semiconductors and consumer industries. These meetings reinforced our conviction in China's progress in AI technology localisation and Taiwan's capabilities in advanced packaging and optical communications. Within artificial intelligence, we prefer picks and shovels play to leverage China’s AI growth rather than investing in pure play AI model companies themselves.

Our discussions also supported a selective approach at this point: maintaining exposure to businesses that enable domestic computing, semiconductor and industrial capabilities while broadening the portfolio toward adopters with established end markets, clearer monetization pathways and company-specific growth drivers.

We remain encouraged by the earnings outlook of many portfolio holdings as China's broader innovation ecosystem continues to evolve.

View the Fund's Top 10 holdings as of September 30, 2026. Current and future holdings are subject to change and risk.

Average Annual Total Returns - MCSMX as of 09/30/2026
1YR 3YR 5YR 10YR Since Inception Inception Date
14.87% 13.74% -2.91% 9.51% 6.61% 05/31/2011

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. For the Fund's most recent month-end performance visit matthewsasia.com

Fees & Expenses
Gross Expense Ratio 1.57%
Net Expense Ratio 1.40%

Matthews has contractually agreed to waive fees and reimburse expenses to limit the Total Annual Fund Operating Expenses until April 30, 2027. Please see the Fund’s prospectus for additional details.

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, because the fund concentrates its investments in a single-country, its share price may be more volatile, and more affected by political, economic and other events in the country in which it invests than that of funds that are not as geographically concentrated. Non-diversified funds may be more susceptible to any single economic, political or regulatory event than a diversified fund because a higher percentage of a fund’s assets may be invested in the securities of a limited number of issuers.

 

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.