Matthews Pacific Tiger Fund

Matthews Asia Funds

Risk Considerations

  • Investment involves risk. Past performance is not a guide to future performance. It is possible to lose the principal capital of your investment.
  • The Fund invests primarily in Asia ex Japan countries and economies. Investment in such emerging markets may be subject to increased risks such as political, tax, economic, policy, market, liquidity, trading, custody and settlement, currency, legal and regulatory risks.
  • The Fund may, at its discretion, pay dividends out of the capital or effectively out of capital in respect of the distribution shares. Payment of dividends out of capital and/or effectively out of capital amounts to a return or withdrawal of part of an investor's original investment, or from any capital gains attributable to that original investment. Any distribution may result in an immediate reduction of the net asset value per share of the Fund.
  • The Fund invests primarily in equity securities, which may result in increased volatility.
  • The Fund may invest in smaller companies which are likely to carry higher risks than larger companies.
  • The Fund may invest in financial derivative instruments (“FDIs”). Risk associated with FDIs include counterparty/credit risk, liquidity risk, valuation risk, volatility risk and over-the-counter transaction risk. The Fund will not use FDIs extensively for investment purposes.
  • The Fund may use hedging techniques to attempt to offset certain market risks but there is no guarantee that hedging techniques will fully and effectively achieve their desired result. 
  • Investors should not invest in the Fund solely based on the information in this website. Please read the Hong Kong Offering Document carefully for further details including risk factors before investing.

Period ended 30 June 2019

For the first half of 2019, the Matthews Pacific Tiger Fund returned 7.36% while its benchmark, the MSCI All Country Asia ex Japan Index, returned 10.83%. For the quarter ending 30 June, the Fund returned -0.27% while its benchmark returned -0.56% over the same period.

Market Environment:

The first half of the year felt like a roller-coaster ride for equity investors across the region. Asia's capital markets rallied at the start of the year, led by Chinese equities. Volatility flared in May, followed by a rebound in equity prices in June. The dominant factors driving Asia capital markets over the short term were political, stemming from rhetoric around trade relations between the U.S. and China. Following the recent G-20 Summit, the tone of trade dialogue improved, even though negotiations provided few details and trade issues are likely to linger. On a positive note, China's policymakers seem to be taking a more proactive stance in preparing China for a less certain macroeconomic environment. Despite recent volatility, China's domestic markets and the Hong Kong market were among the best-performing in Asia.

Outside of China, Asian markets were generally positive, but seemed lackluster compared with China's markets. Chinese equities returned roughly 13% year to date, while India and Indonesia's equity markets each notched roughly 7% gains respectively for the same period. Currencies were somewhat stable with the exception of the Taiwanese dollar and the Korean won, which were more exposed to the tech cycle. Larger companies tended to do better, perhaps due to index flows, but also in their prospects for having slightly better earnings profiles than some smaller companies.

Contributors and Detractors:

The Fund lagged its benchmark in the first half. Several factors weighed on relative performance, one of the most significant being an overweight allocation to India. Our holdings in India are the natural outcome of our bottom-up stock selection process. The Indian companies in our portfolio embody many attractive investment attributes and provide opportunities for finding uncorrelated earnings growth. In the short term, however, our Indian holdings caused performance to trail the benchmark.

From a sector standpoint, our holdings in communication services were also a detractor from relative performance. While the benchmark tends to be concentrated in a couple of big technology names in China, the Fund takes a more diversified approach to investing in Asia's digital economy, seeking to spread our holdings across the region. One such holding is Naver, South Korea's largest search engine. To expand its business beyond search advertising revenues, Naver is looking to diversify its business model to include gaming, e-commerce payments and cloud-based services. To achieve these goals, Naver is making near-term investments that weigh on its earnings profile. However, we continue to like the company's long-term prospects.

For the most recent quarter, the Fund was roughly in line with its benchmark. Strong stock selection, particularly in China, was a contributor to performance in the quarter. We continue to see increased investment opportunities in China, especially in its dynamic service sector, discussed in the next section. 

Notable Portfolio Changes:

Recent IPOs provided opportunities for us to invest in Chinese health care and education, sectors we believe are poised to benefit from rising incomes and domestic consumer spending. To fund new positions, we trimmed holdings in South Korea and Malaysia. Meanwhile, we also rotated capital within the portfolio. A few existing holdings experienced temporary aberrations in their earnings profiles, creating opportunities to add to high-conviction positions. Before committing additional capital, we conducted thorough due diligence to garner the confidence that any disruptions were short term in nature. Beyond China, we also added capital around the margins to holdings in Indonesia.


Media coverage of U.S. and China trade relations tends to focus on short-term developments. Investing with a long-term view, we try to ignore the noise and remain focused on the fundamentals that actually drive growth. We pay particular attention to company earnings, as well as secular trends we see on the ground. Amid current headlines, it is easy for investors to lose sight of the transformation that is taking place among China's enormous middle class. Income growth has expanded rapidly from the eastern seaboard of China to the country's vast interior. We expect consumers in less-developed urban centers to drive China's economic growth for many years to come, so we continue to look for businesses that are geared toward that opportunity set.

Outside of China, recent elections in India and Indonesia resulted in wins for incumbents, adding a sense of political stability in both countries. With elections concluded, we are optimistic that reform cycles in both countries could get a boost. In the near term, an easing monetary environment may loosen some of the constraints on liquidity, and hence better support growth. Inspired by the innovation and grit of Asia's entrepreneurs, we will continue to look for opportunities across the market-cap spectrum, including small and medium-size enterprises. As always, we will invest in companies that we believe have sustainable growth prospects that harness the rising spending power of Asia's middle class.

Annual Returns For the Years Ended 31 December
Matthews Pacific Tiger Fund 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009
I (Acc) (USD) -10.71% 39.47% -0.29% -1.91% 11.22% 4.86% 18.65% -12.40% n.a. n.a.
I (Acc) (GBP) -5.71% 27.14% 19.96% 3.14% 18.00% 2.56% 13.54% n.a. n.a. n.a.
MSCI All Country Asia ex Japan Index (USD) -14.12% 42.08% 5.76% -8.90% 5.11% 3.34% 22.70% -17.07% n.a. n.a.

For YTD performance figures, please refer to the Quarterly and Monthly Performance pages.


Additional performance, attribution, liquidity, value at risk (VaR), security classification and holdings information is available on request for certain time periods.

There is no guarantee that a company will pay or continue to increase dividends.

Performance figures discussed in any of the Fund Manager Commentaries reflect that of the Institutional Accumulation Class Shares and have been calculated in USD, including ongoing charges and excluding subscription fee and redemption fee investors might have to pay. Performance details provided for the Fund are based on a NAV-to-NAV basis, with any dividends reinvested, and are net of management fees and other expenses.  Past performance information is not indicative of future performance. Investors may not get back the full amount invested.

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, including, without limitation, that the information is complete or timely. Matthews Asia and its affiliates do not accept any liability for losses either direct or consequential caused by the use of this information. 

The views and opinions discussed herein were as of the report date, subject to change and may not reflect the writer›s 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.

Sources: Brown Brothers Harriman (Luxembourg) S.C.A, Matthews Asia, FactSet Research Systems, Bloomberg