Monthly commentary - August 2021

Monthly commentary - August 2021


Chinese equities were largely flat in August and negative market sentiment generated by the recent government regulatory announcements eased in the second half of the month. Cyclical, value-oriented sectors outperformed, with materials, energy and industrials posting the strongest gains while health care, consumer discretionary and communication services companies lagged. Interestingly, those same lagging sectors for the month were some of the best performers during the last week of August, as investors were attracted to low valuations, especially within beaten-down internet services companies.


For the month ending August 31, 2021, the Fund returned –0.55%, while its benchmark, the MSCI China All Shares Index, returned 0.23%. From a sector perspective, the Fund’s holdings in the industrials, information technology and materials sectors detracted from relative performance, while holdings in financials and health care contributed to relative performance.

Among individual holdings, e-commerce company was a top contributor to performance.’s stock price gained ground in August after being weighed down earlier in the year by market concerns stemming from China’s regulatory announcements directed at large internet platforms. Despite the uncertain regulatory backdrop, reported strong second quarter earnings late in the month, which boosted market sentiment toward the company.

Sungrow Power Supply Company, a solar component manufacturer, was a performance detractor during the month. Sungrow’s stock experienced some profit taking as the solar power industry as a whole experienced a pullback after a strong period of outperformance. Our investment thesis for Sungrow remains intact, as the company continues to benefit from renewable energy growth. China’s plan to be carbon neutral by 2060 has promoted significant volume expansion opportunities across the solar chain, and we see additional opportunity for the company to expand its total addressable market as the energy storage system market grows.


Looking ahead to the rest of the year, stock market volatility can continue to hurt sentiment but should not have a meaningful impact on macro-economic performance, in our view. While market concerns of increased regulatory scrutiny may persist over the near term, we expect stock prices may be less influenced by macro forces of synchronized recovery, regulatory oversight and inflation fears and more influenced by company fundamentals and secular growth. In fact, we believe that company fundamentals and attractive valuations can overcome the headwinds of negative headlines and rhetoric.

We are also optimistic about China’s medium-term economic prospects based in large part on the continuing evolution of government policy designed to embrace private enterprise and markets. Private firms are the engine of China’s growth and job creation and are China’s most innovative firms, and the government’s economic growth plans are based on innovation.

Source: Brown Brothers Harriman & Co. Source for index data: MSCI

Past performance is not a guide to future returns. Investment returns are historical and do not guarantee future results. Investment returns reflect changes in net asset value and market price per share during each period and assumes that dividends and capital gains distributions, if any, were reinvested. The net asset value (NAV) percentages are not an indication of the performance of a shareholder›s investment in the Fund, which is based on market price. NAV performance includes the deduction of management fees and other expenses.

The views and opinions in this 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. Investors should consider the investment objectives, risks, charges and expenses of any mutual fund carefully before investing. This and other information is contained in the Fund's annual and semiannual reports, proxy statement and other Fund information, which may be obtained by contacting your financial advisor or reviewing this website.

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. Matthews International Capital Management, LLC does not accept any liability for losses either direct or consequential caused by the use of this information.

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