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MCHFX Rose despite China’s Volatile Equity Market

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Investment objective and strategy

The objective of the Matthews China Fund – Investor Class (MCHFX) is to seek long-term capital appreciation.

MCHFX seeks to achieve its investment objective by investing at least 80% of its total assets. Its assets include borrowings for investment purposes in the common and preferred stocks of companies located in China. According to fund literature, “China includes its administrative and other districts, such as Hong Kong.”

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Fund facts

MCHFX had net assets of $799.5 million as of November 30, 2015. The fund has a gross expense ratio of 1.1%. The fund was incepted on February 19, 1998.

Performance evaluation

For the month ending on November 30, 2015, MCHFX posted a positive return of 0.1%. Despite China’s volatile equity market environment and a slowdown in the economy, MCHFX was able to post a positive performance for November 2015. MCHFX invests in ADRs (American depositary receipts) of Ctrip.com (CTRP) and JD.com (JD). They rose by 11.1% and 7.1, respectively, for the same period.

For the three months ending on November 30, 2015, the returns rose by 10.3%. Meanwhile, the returns grew by 2.8% YTD (year-to-date).

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Benchmark

MCHFX benchmarks its performance to the MSCI China Index. The MSCI China Index captures large and mid-cap representation across China H shares, B shares, Red chips, and P chips. For the month ending on November 30, 2015, the MSCI China Index fell by 3.4%.

Portfolio composition

MCHFX’s latest available portfolio composition was as of September 2015. So, we’re evaluating the portfolio composition as of September 2015. To maintain parity, we used September 2015 for the portfolio composition of the MSCI China Index.

As of September 2015, the financial sector dominates MCHFX’s portfolio. It accounts for 38.3%. IT and industrials account for 16.5% and 15.3% of the fund’s assets. The fund doesn’t have exposure to telecommunication services. It holds 1.5% of the portfolio assets in cash.

Top holdings

As of November 30, 2015, the top ten holdings of MCHFX account for 39.6% of the total portfolio weight. The top ten portfolio holdings include Tencent Holdings (TCEHY), China Construction Bank (CICHY), Baidu (BIDU), NetEase (NTES), and JD.com.

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