Matthews Asia ex Japan Dividend 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, social, 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 September 2019

For the quarter ending 30 September 2019, the Matthews Asia ex Japan Dividend Fund returned -1.28%, while its benchmark, the MSCI All Country Asia ex Pacific Index, returned -4.39%.

Market Environment:

Asian markets remained volatile during the third quarter amid uncertainty generated by U.S.–China trade tensions. Political unrest in Hong Kong also weighed on China/Hong Kong markets during the quarter, further dampening investor sentiment. On a positive note, central bankers and policymakers in many parts of Asia started shifting toward easing policies to help boost growth with both interest-rate cuts and fiscal stimulus measures. Corporate earnings for Asia, while likely still in negative growth territory on a year-over-year basis, started showing signs of bottoming.

Performance Contributors and Detractors:

During the third quarter, a top performance contributor to the Fund was China East Education, whose shares we bought in the second quarter via its initial public offering. In a relatively volatile market environment, we felt it was understandable that education-service companies with predictable cash flow and earnings were favored. Minth Group, an auto-parts company in China, also staged a relief rally and became the second-largest performance contributor. Minth's business growth was disrupted by a severe downturn in China's automobile industry. Together with market concerns about its U.S. export business being exposed to the trade dispute, Minth's shares were aggressively sold off over past 12 months, becoming a main performance detractor. Just as overall sentiment turned bearish, however, Minth's first-half 2019 earnings, despite registering a 9% year-over-year decline, were actually an upside surprise to the market consensus. Both a sequential recovery of its gross margin, an important operating indicator, and a sustained growth of its overseas operations we believe helped the company to partially offset the tough domestic business. 
 
Yangzijiang Shipbuilding was the largest detractor to performance during the quarter, as its chairman was asked for assistance in investigating a retired government official for suspected corruption. Although we believed there would be no immediate impact on the company's operation, we decided to exit the position as this type of investigation could drag on for years. United Tractors, an Indonesian mining equipment distribution and contracting business, was second-largest performance detractor during the quarter. The company's near-term earnings delivery was negatively impacted by weak commodity prices and an uncertain demand outlook.

Notable Portfolio Changes:

During the quarter, the Fund initiated several new dividend growth stocks, One was PT Industri Jamu dan Farmasi, an herbal-based medicine and drink producer based in Indonesia. This type of highly localized product is a strong area for local Asian companies to grow without much competition from multinational companies. One more addition was Zhongsheng Group, a Chinese auto-dealership business, which sells and services passenger cars with brands such as Toyota and Mercedes-Benz. 
 
On the other hand, the Fund exited a few companies, including China Construction Bank and Haier Smart Home. For each, we believed that changes in business fundamentals no longer supported our initial investment thesis. We decided to redeploy the capital, including funding some new positions.

Outlook:

A protracted U.S.–China trade dispute continues to be the biggest overhang for Asian equities. Notwithstanding, policymakers in both Asia and the U.S. are deploying policy tools to address any significant slowdown. From a bottom-up perspective with a focus on company fundamentals, the current macro and geopolitical uncertainties are creating compelling long-term investment opportunities in Asia.
 

Annual Returns For the Years Ended 31 December
Matthews Asia ex Japan Dividend Fund 2018 2017 2016 2015 2014
I (Acc) (USD) -12.37% 47.29% 6.89% 0.10%* n.a.
I (Acc) (GBP) -7.38% 34.23% 28.50% 1.40%* n.a.
MSCI All Country Asia ex Japan Index (USD) -14.12% 42.08% 5.76% -0.42%* n.a.

* Performance shown from share class launch date to calendar year end.

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