Under normal circumstances, the Matthews China 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. 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, 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.
These and other risks associated with investing in the Fund can be found in the
prospectus.
China - China includes its administrative and other districts, such as Hong Kong
Fees & Expenses
Gross Expense Ratio
1.15%
Objective
Long-term capital appreciation
Strategy
Under normal circumstances, the Matthews China 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. 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, 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.
The risks associated with investing in the Fund can be found in the prospectus
Performance
Monthly
Quarterly
Calendar Year
As of 07/31/2024
Average Annual Total Returns
Name
1MO
3MO
YTD
1YR
3YR
5YR
10YR
Since Inception
Inception Date
Matthews China Fund - MCHFX
02/19/1998
MCHFX
-1.47%
-4.28%
-1.89%
-18.96%
-18.77%
-3.46%
1.77%
6.98%
MSCI China Index
-1.22%
-0.71%
3.53%
-12.18%
-13.70%
-4.26%
0.64%
2.73%
MSCI China All Shares Index
-0.60%
-1.83%
1.76%
-12.70%
-13.10%
-2.64%
n.a.
n.a.
As of 06/30/2024
Average Annual Total Returns
Name
1MO
3MO
YTD
1YR
3YR
5YR
10YR
Since Inception
Inception Date
Matthews China Fund - MCHFX
02/19/1998
MCHFX
-5.40%
2.39%
-0.43%
-7.88%
-20.70%
-3.43%
2.33%
7.06%
MSCI China Index
-1.84%
7.16%
4.82%
-1.43%
-17.53%
-4.12%
1.56%
2.78%
MSCI China All Shares Index
-2.41%
3.46%
2.37%
-4.19%
-16.27%
-2.54%
n.a.
n.a.
For the years ended December 31st
Name
2023
2022
2021
2020
2019
2018
2017
2016
2015
2014
Matthews China Fund - MCHFX
MCHFX
-19.22%
-24.40%
-12.26%
43.05%
34.56%
-21.42%
59.37%
-5.18%
2.41%
-4.42%
MSCI China Index
-11.04%
-21.80%
-21.64%
29.67%
23.66%
-18.75%
54.33%
1.11%
-7.62%
8.26%
MSCI China All Shares Index
-11.35%
-23.47%
-12.80%
33.61%
27.87%
-23.15%
41.43%
-7.69%
-2.88%
23.64%
MSCI China Index since inception value calculated from 2/28/98.
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 $10,000 Investment Since Inception
(as of 06/30/2024)
Source: BNY Mellon Investment Servicing (US) Inc. All performance is in US$.
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.
Past performance is no guarantee of future results. High ratings and rankings does not assure favorable performance.
The Overall Morningstar® Rating for a fund is derived from a weighted-average of the performance figures associated with its three-, five- and (if applicable) ten-year ratings.
Morningstar RatingTM for funds, or "star rating", is calculated for managed products (including mutual funds, variable annuity and variable life subaccounts, exchange-traded funds, closed-end funds, and separate accounts) with at least a three-year history. Exchange-traded funds and open-ended mutual funds are considered a single population for comparative purposes. It is calculated based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a managed product's monthly excess performance, placing more emphasis on downward variations and rewarding consistent performance. The Morningstar Rating does not include any adjustment for sales loads. The top 10% of products in each product category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars, and the bottom 10% receive 1 star. The Overall Morningstar Rating for a managed product is derived from a weighted average of the performance figures associated with its three-, five-, and 10-year (if applicable) Morningstar Rating metrics. The weights are: 100% three-year rating for 36-59 months of total returns, 60% five-year rating/40% three-year rating for 60-119 months of total returns, and 50% 10-year rating/30% five-year rating/20% three-year rating for 120 or more months of total returns. While the 10-year overall star rating formula seems to give the most weight to the 10-year period, the most recent three-year period actually has the greatest impact because it is included in all three rating periods.
Lipper Analytical Services, Inc., rankings are based on total return, including reinvestment of dividends and capital gains for the stated periods. Funds are assigned a rank within a universe of funds similar in investment objective as determined by Lipper. For the absolute rankings shown the lower the number rank, the better the Fund performed compared to other funds in the classification group. Lipper also calculates a quartile ranking which divides the peer group into quartiles to identify funds of similar quality. Funds in the 1st or 2nd quartile had outperformed the average fund in the peer group while funds in the 3rd or 4th quartile had underperformed.
Andrew Mattock is a Portfolio Manager at Matthews and manages the firm’s China, China Small Companies, China Discovery 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.
Winnie Chwang is a Portfolio Manager at Matthews and manages the firm’s China Small Companies, China Discovery and China Dividend Strategies and co-manages the China, China A-Share, 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.
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, China Discovery, China Small Companies 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.
Hardy Zhu is a Portfolio Manager at Matthews and co manages the firm’s China, China Small Companies, China Dividend, China Discovery, China A-Share, Emerging Markets Small Companies and Emerging Markets Discovery Strategies. Prior to joining the firm in 2011, Hardy was an Equity Analyst with Delaware Investments researching Chinese equities. Before earning his MBA from Duke University in 2007, Hardy was a senior accountant at PNC Global Investment Servicing from 2000 to 2005. Hardy began his career at China National Nonferrous Metals Import & Export Co., one of the largest state-owned international trading companies in China. He received a Master of Accounting degree from the Virginia Polytechnic Institute and State University and a B.S. in Industrial Foreign Trade from Shenyang Polytechnic University in China. Hardy is fluent in Mandarin.
Portfolio Characteristics
(as of 06/30/2024)
Fund
Benchmark
Number of Positions
62
657
Weighted Average Market Cap
$125.9 billion
$141.4 billion
Active Share
54.6
n.a.
P/E using FY1 estimates
10.2x
9.6x
P/E using FY2 estimates
9.1x
8.7x
Price/Cash Flow
5.6
5.8
Price/Book
1.3
1.3
Return On Equity
14.3
13.5
EPS Growth (3 Yr)
10.6%
8.7%
Sources: Factset Research Systems, Inc.
Risk Metrics (3 Yr Return)
(as of 06/30/2024)
Category
3YR Return Metric
Alpha
-2.98%
Beta
1.02
Upside Capture
104.17%
Downside Capture
105.71%
Sharpe Ratio
-0.74
Information Ratio
-0.35
Tracking Error
8.97%
R²
92.34
-2.98%
Alpha
1.02
Beta
104.17%
Upside Capture
105.71%
Downside Capture
-0.74
Sharpe Ratio
-0.35
Information Ratio
8.97%
Tracking Error
92.34
R²
Fund Risk Metrics are reflective of Investor share class.
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 06/30/2024)
Sector Allocation
Market Cap Exposure
China Exposure
Sector
Fund
Benchmark
Difference
Consumer Discretionary
28.2
28.3
-0.1
Financials
21.0
17.6
3.4
Communication Services
16.6
22.7
-6.1
Industrials
8.7
5.0
3.7
Consumer Staples
7.3
4.3
3.0
Information Technology
5.2
5.9
-0.7
Real Estate
4.4
2.0
2.4
Energy
3.6
4.1
-0.5
Health Care
2.8
3.6
-0.8
Materials
2.2
3.6
-1.4
Utilities
0.0
2.9
-2.9
Cash and Other Assets, Less Liabilities
0.1
0.0
0.1
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)
72.0
68.8
3.2
Large Cap ($10B-$25B)
15.5
14.8
0.7
Mid Cap ($3B-$10B)
7.7
15.7
-8.0
Small Cap (under $3B)
4.8
0.7
4.1
Cash and Other Assets, Less Liabilities
0.1
0.0
0.1
China Exposure
Portfolio Weight
Hong Kong Listed Companies
64.0
Mainland China Listed Companies
25.3
ADR/GDR
9.8
Other
0.7
Cash and Other Assets, Less Liabilities
0.1
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.
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.
China’s market performed well in the second quarter, helped by positive sentiment generated by government initiatives to support the real estate sector and strong exports which compensated for lackluster domestic consumption.
The government’s move to enable provinces to buy real estate inventory from developers and use it for social housing has been notable as it should begin to take the stress off developers’ balance sheets and provide a meaningful tailwind. That said, China remains an economy with many challenges and macro indicators remained mixed. On the retail side there has been improvement, but overall consumer sentiment is still quite weak.
In the quarter, we focused on companies that are producing better earnings. In large sectors, like digital and e-commerce companies, there have been improvements on the revenue side. More generally, margins are starting to widen, and some companies are making narrower losses in some of their higher growth areas.
Contributors and Detractors:
For the quarter ended June 30, 2024, the Matthews China Fund returned 2.39%, (Investor Class) and 2.48% (Institutional Class) while its benchmark, the MSCI China Index, returned 7.16% over the same period.
On a sector basis, the top three contributors to relative performance were health care and energy due to stock selection, and consumer discretionary due to an underweight allocation and stock selection. The top three detractors were financials, industrials and information technology (IT) due to stock selection.
The largest contributors to absolute performance during the quarter included Tencent Holdings, an online gaming, and social media conglomerate, Meituan, China’s largest food delivery service and internet platform company, and PetroChina, one of China’s largest state-owned oil and gas companies. The top three detractors to performance included Wuliangye Yibin, a baijiu distillery, Wingtech Technology, a semiconductor and communications equipment manufacturing company, and China International Travel Service, a retailer of duty-free goods.
Outlook
China continues to face several economic and external headwinds; however, we see opportunities in stocks that are improving earnings and in companies with robust dividend yield support and share buybacks.
While there might be moderate catalysts for growth on the macro front, in our view there is unlikely to be a big fiscal or monetary stimulus for the economy as such moves in the past have left China with large debt burdens.
In terms of geopolitics, and particularly related to the upcoming U.S. presidential election, we think a lot of expectations are priced into the markets but there will likely be volatility as signals emerge over the potential winner. It could be that the election provides an opportunity to reduce positions in China or, as we near the election, valuations in China equities may decline and the market may overreact to the election outcome, in which case there could be opportunities to increase exposure.
View the Fund’s Top 10 holdings as of June 30, 2024. Current and future holdings are subject to change and risk.
Average Annual Total Returns - MCHFX as of 06/30/2024
1YR
3YR
5YR
10YR
Since Inception
Inception Date
-7.88%
-20.70%
-3.43%
2.33%
7.06%
02/19/1998
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
1.15%
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.
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.
The MSCI Korea 25/50 Index is designed to measure the performance of the large and mid cap segments of the Korean market. It applies certain investment limits that are imposed on regulated investment companies, or RICs, under the current US Internal Revenue Code.
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
June 30, 2024
Market Environment
Contributors and Detractors:
Outlook
View the Fund’s Top 10 holdings as of June 30, 2024. Current and future holdings are subject to change and risk.
Average Annual Total Returns - MCHFX as of 06/30/2024
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
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.