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Matthews Emerging Markets Small Companies Fund
MSMLX

The Matthews Emerging Markets Small Companies Fund (Institutional) received the 2023 Refinitiv Lipper Fund Award for Best Emerging Markets Fund over three years. Methodology.

Snapshot
  • Seeks alpha in innovative, capital efficient entrepreneurial companies in emerging markets
  • Focus on firms that have a strong competitive advantage through pricing power, distribution capability, and/or differentiated technologies and services
  • Bias toward businesses that cater to rising domestic consumer demand

09/15/2008

Inception Date

1.29%

YTD Return

(as of 11/04/2024)

$25.85

NAV

(as of 11/04/2024)

+0.16

1 Day NAV Change

(as of 11/04/2024)

Objective

Long-term capital appreciation

Strategy

Under normal circumstances, the Matthews Emerging Markets Small Companies 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 Small Companies located in emerging market countries. Emerging market countries generally include every country in the world except the United States, Australia, Canada, Hong Kong, Israel, Japan, New Zealand, Singapore and most of the countries in Western Europe. Certain emerging market countries may also be classified as “frontier” market countries, which are a subset of emerging market countries with newer or even less developed economies and markets, such as Sri Lanka and Vietnam. The list of emerging market countries and frontier market countries may change from time to time. 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 Emerging Markets Small Cap Index.

Risks

Investing in international and emerging markets may involve additional risks, such as social and political instability, market illiquidity, exchange rate fluctuations, a high level of volatility and limited regulation. Additionally, investing in emerging and frontier securities involves greater risks, as these countries are substantially smaller, less liquid and more volatile than securities markets in more developed markets. The Fund is non-diversified as it concentrates its investments in small sized companies. Investing in small- and mid-size companies is more risky and volatile than investing in large companies as they may be more volatile and less liquid than larger companies.

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

Fund Facts
Inception Date 09/15/2008
Fund Assets $730.58 million (09/30/2024)
Currency USD
Ticker MSMLX
Cusip 577-125-206
Portfolio Turnover 26.9%
Benchmark MSCI Emerging Markets Small Cap Index
Geographic Focus Emerging market countries generally include every country in the world except the United States, Australia, Canada, Hong Kong, Israel, Japan, New Zealand, Singapore and most of the countries in Western Europe.
Fees & Expenses
Gross Expense Ratio 1.34%
Net Expense Ratio 1.34%

Performance

  • Monthly
  • Quarterly
  • Calendar Year
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As of 09/30/2024
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Emerging Markets Small Companies Fund - MSMLX
09/15/2008
MSMLX
3.41% 6.80% 7.01% 12.80% 2.77% 14.28% 7.49% 11.08%
MSCI Emerging Markets Small Cap Index
3.71% 5.64% 13.30% 23.55% 5.68% 12.73% 6.27% 7.72%
As of 09/30/2024
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Emerging Markets Small Companies Fund - MSMLX
09/15/2008
MSMLX
3.41% 6.80% 7.01% 12.80% 2.77% 14.28% 7.49% 11.08%
MSCI Emerging Markets Small Cap Index
3.71% 5.64% 13.30% 23.55% 5.68% 12.73% 6.27% 7.72%
For the years ended December 31st
Name 2023 2022 2021 2020 2019 2018 2017 2016 2015 2014
Matthews Emerging Markets Small Companies Fund - MSMLX
MSMLX
19.88% -16.84% 22.14% 43.68% 17.38% -18.05% 30.59% -1.44% -9.43% 11.39%
MSCI Emerging Markets Small Cap Index (USD)
24.49% -17.54% 19.29% 19.72% 11.93% -18.30% 34.22% 2.56% -6.57% 1.34%

Before April 30, 2021, the Fund was managed with a materially different investment strategy and may have achieved materially different performance results under its current investment strategy from the performance shown for periods before that date.

MSCI Emerging Markets Small Cap Index since inception value calculated from 9/15/08.

The Fund’s primary benchmark index is the MSCI Emerging Markets Index and the secondary benchmark is the MSCI Emerging Markets Small Cap Index.

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)

MSCI AC Asia ex Japan Small Cap Index since inception value calculated from 9/15/08.

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 711 funds
  • 3 YEAR
  • out of 711 funds
  • 5 YEAR
  • out of 639 funds
  • 10 YEAR
  • out of 426 funds
  • 1 YEAR
  • 4th
  • 736 out of 775 funds
  • 3 YEAR
  • 1st
  • 116 out of 695 funds
  • 5 YEAR
  • 1st
  • 2 out of 623 funds
  • 10 YEAR
  • 1st
  • 7 out of 410 funds
  • SINCE INCEPTION
  • 1st
  • 1 out of 197 funds

Best Emerging Markets Fund Over 5 Years

MISMX honored with 2024 LSEG Lipper Fund Award.

Methodology

Ratings agency calculation methodology

Portfolio Managers

Vivek  Tanneeru photo
Vivek Tanneeru

Lead Manager

Jeremy  Sutch, CFA photo
Jeremy Sutch, CFA

Co-Manager

Alex  Zarechnak photo
Alex Zarechnak

Co-Manager

Hardy  Zhu photo
Hardy Zhu

Co-Manager

Portfolio Characteristics

(as of 09/30/2024)
Fund Benchmark
Number of Positions 79 2,060
Weighted Average Market Cap $4.6 billion $2.2 billion
Active Share 99.8 n.a.
P/E using FY1 estimates 15.8x 15.0x
P/E using FY2 estimates 13.6x 13.0x
Price/Cash Flow 10.1 8.8
Price/Book 2.2 1.6
Return On Equity 11.1 12.8
EPS Growth (3 Yr) 27.4% 21.4%

Sources: Factset Research Systems, Inc.

Risk Metrics (3 Yr Return)

(as of 06/30/2024)
-1.72%
Alpha
0.94
Beta
78.25%
Upside Capture
91.17%
Downside Capture
-0.13
Sharpe Ratio
-0.22
Information Ratio
9.34%
Tracking Error
70.37

Fund Risk Metrics are reflective of Investor share class.

Sources: Zephyr StyleADVISOR

Top 10 Holdings

(as of 09/30/2024)
Name Sector Country % Net Assets
Shriram Finance, Ltd. Financials India 5.8
Bandhan Bank, Ltd. Financials India 5.6
Full Truck Alliance Co., Ltd. Industrials China/Hong Kong 3.9
Legend Biotech Corp. Health Care China/Hong Kong 3.6
Hugel, Inc. Health Care South Korea 3.3
Grupo SBF SA Consumer Discretionary Brazil 2.8
Phoenix Mills, Ltd. Real Estate India 2.7
Flat Glass Group Co., Ltd. Information Technology China/Hong Kong 2.3
Inox Wind, Ltd. Industrials India 2.3
Silergy Corp. Information Technology China/Hong Kong 2.2
TOTAL 34.5

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 09/30/2024)
  • Sector Allocation
  • Country Allocation
  • Market Cap Exposure
Sector Fund Benchmark Difference
Industrials 21.6 18.2 3.4
Consumer Discretionary 20.4 11.9 8.5
Financials 18.8 10.8 8.0
Information Technology 18.4 16.6 1.8
Health Care 9.8 9.3 0.5
Real Estate 5.9 6.5 -0.6
Consumer Staples 4.1 6.3 -2.2
Materials 1.6 11.3 -9.7
Communication Services 1.6 3.7 -2.1
Utilities 0.3 3.4 -3.1
Energy 0.0 1.8 -1.8
Liabilities in Excess of Cash and Other Assets -2.5 0.0 -2.5

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 27.1 9.4 17.7
India 24.9 29.6 -4.7
Taiwan 11.6 21.2 -9.6
Brazil 8.9 3.3 5.6
South Korea 8.7 11.3 -2.6
Vietnam 5.1 0.0 5.1
South Africa 3.2 3.6 -0.4
Philippines 2.7 0.7 2.0
Chile 2.3 0.7 1.6
Saudi Arabia 2.1 3.7 -1.6
Indonesia 1.8 2.0 -0.2
Poland 1.8 1.3 0.5
Turkey 1.1 1.9 -0.8
Thailand 0.6 3.2 -2.6
Bangladesh 0.5 0.0 0.5
Malaysia 0.0 2.8 -2.8
Mexico 0.0 1.2 -1.2
United Arab Emirates 0.0 1.1 -1.1
Kuwait 0.0 1.0 -1.0
Greece 0.0 0.8 -0.8
Qatar 0.0 0.6 -0.6
Egypt 0.0 0.2 -0.2
Colombia 0.0 0.1 -0.1
Hungary 0.0 0.1 -0.1
Peru 0.0 0.1 -0.1
Liabilities in Excess of Cash and Other Assets -2.5 0.0 -2.5

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

Equity market cap of issuer Fund Benchmark Difference
Mega Cap (over $25B) 0.0 0.0 0.0
Large Cap ($10B-$25B) 8.1 0.1 8.0
Mid Cap ($3B-$10B) 47.2 21.7 25.5
Small Cap (under $3B) 47.3 78.1 -30.8
Liabilities in Excess of Cash and Other Assets -2.5 0.0 -2.5

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 Emerging Markets Small Cap Index.

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)
12/13/2023 12/14/2023 $0.40545 $0.00000 $1.72886 $2.13431 7.9% N.A.
12/13/2022 12/14/2022 $0.08965 $0.14027 $1.62616 $1.85608 7.3% N.A.
12/14/2021 12/15/2021 $0.00000 $1.52123 $0.22299 $1.74422 5.5% N.A.
12/15/2020 12/16/2020 $0.05487 $0.00000 $0.01710 $0.07197 0.3% N.A.
12/16/2019 12/17/2019 $0.09231 $0.00000 $0.00000 $0.09231 0.5% 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, 2024

Market Environment

  • Emerging markets performed well overall despite experiencing volatility related to concerns over a U.S. slowdown, China’s economic headwinds and sustainability of the artificial intelligence (AI) boom. Toward the end of the quarter, the Federal Reserve’s 50 basis point (O.50%) interest rate cut—and expectations of further cuts—helped to support market gains.
  • India’s equity market delivered a robust performance. Economic growth rates remain high and following the formation of a coalition government after the general election, there are signs that growth is becoming more balanced to include services and consumption as well as infrastructure and industry.
  • In North Asia, Taiwan’s technology-heavy market was challenged despite the potential growth opportunities that AI-linked segments offer, in part as prior performance had been strong and as questions arose over valuations. South Korea’s market underperformed against the benchmark with semiconductor stocks particularly soft.  Meanwhile, China’s economy continued to struggle with weak consumer sentiment and declining property prices. Toward the end of the quarter its markets rallied after the central bank launched a broad stimulus package with measures to add liquidity, aid the property market and boost equity markets.
  • Latin America’s major markets faced their own domestic headwinds. In Mexico, uncertainty over potential policies by the new president and their impact for the private sector weighed on market performance and sentiment. Meanwhile Brazil’s equity markets posted resilient performance. However, inflation remained high and the central bank is currently in a rate-increasing cycle.

Contributors and Detractors

  • For the quarter ended September 30, 2024, the Matthews Emerging Markets Small Companies Fund returned 6.80%, (Investor Class) and 6.89% (Institutional Class) while its benchmark, the MSCI Emerging Markets Small Cap Index, returned 5.64% over the same period.
  • On a country basis, the top three contributors to relative performance were China/Hong Kong due to an overweight allocation, Brazil and India due to stock selection. The top three detractors were Taiwan due to stock selection, Thailand due to an underweight allocation and Saudi Arabia due to stock selection.
  • On a sector basis, the top three contributors to relative performance were industrials, consumer discretionary and financials due to stock selection. The top three detractors were information technology (IT), health care and materials due to stock selection.
  • The largest contributors to absolute performance included Shriram Finance, an Indian financial services provider, Inox Wind, an Indian provider of wind power solutions, and Grupo SBF, a Brazilian sporting goods retailer. The top three detractors included M31 Technology, a Taiwanese silicon intellectual property (IP) provider, Wiwynn, a Taiwanese computer manufacturing company, and Eugene Technology, a wafer fab tool manufacturer.

Outlook

  • The Fed’s rate cut will, we think, provide an impetus for a number of central banks in emerging markets to cut their own rates which should be favorable for businesses and economies. This is a significant turning point particularly for economies in Asia in our view. Fed rate cuts typically also bring downward pressure on the U.S. dollar which is often a tailwind for emerging economies.
  • In China, it will take time to see if the stimulus measures provide a sustainable catalyst for recovery. Corporate earnings are coming through in some areas including e-commerce and internet platforms. Companies more directly tied to China’s domestic economy are facing greater challenges with margins on certain consumer sectors still under pressure.
  • In India, earnings growth is feeding through to equity returns but valuations remain expensive. Thus, finding businesses where rates of growth support valuation multiples is critical. Across emerging markets, we expect volatility to continue, particularly as we approach and pass through the U.S. election. Further out, we think  market performance will start to center around domestic economic expansion and less on specific drivers like U.S. technology-related growth.

 

View the Fund’s Top 10 holdings as of September 30, 2024. Current and future holdings are subject to change and risk.

Average Annual Total Returns - MSMLX as of 09/30/2024
1YR 3YR 5YR 10YR Since Inception Inception Date
12.80% 2.77% 14.28% 7.49% 11.08% 09/15/2008

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 1.34%
Net Expense Ratio 1.34%

Matthews has contractually agreed to waive fees and reimburse expenses to limit the Total Annual Fund Operating Expenses until April 30, 2025. Please see the Fund’s prospectus for additional details.

Investing in international and emerging markets may involve additional risks, such as social and political instability, market illiquidity, exchange rate fluctuations, a high level of volatility and limited regulation. Additionally, investing in emerging and frontier securities involves greater risks, as these countries are substantially smaller, less liquid and more volatile than securities markets in more developed markets. The Fund is non-diversified as it concentrates its investments in small sized companies. Investing in small- and mid-size companies is more risky and volatile than investing in large companies as they may be more volatile and less liquid than larger companies.

 

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.