Monthly Commentary -November 2021

Monthly Commentary -November 2021


China equities underperformed regional Asian stocks in November, even as Chinese regulatory announcements slowed in recent months. Fears of an economic growth slowdown in China were exacerbated late November as the Omicron coronavirus variant threatened the reopening of major economies further dampening recovery. China›s domestic equity market sentiment once again diverged from foreign sentiment. Local A-shares, especially broad indices including small and mid caps, posted positive returns as Chinese investors continued to invest into local mutual funds. Chinese investors reacted positively to the government›s bias towards increased lending into domestic supply chain companies, especially within the information technology and renewable energy industries. Large platform consumer discretionary names struggled, as did the energy and utilities sectors.


For the month ending November 30, 2021, the Fund returned -5.11%, while its benchmark, the MSCI China All Shares Index, returned -3.70%. From a sector perspective, the Fund›s holdings in consumer discretionary and utilities were the top contributors to relative performance. On the other hand, the Fund›s holdings in financials, health care and materials detracted from relative performance.

Among individual holdings, e-commerce company was a top contributor to performance.'s stock price gained ground in October 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 August, which boosted market sentiment toward the company.

A detractor among individual stocks was Times China Holdings, a southern China focused property developer which experienced weak performance due to a continued tighter policy environment. We believe that this presents the opportunity for market consolidation over the longer term, and that leading regional players such as Times China should be able to grow market share under these conditions given their strong balance sheets. Real estate opportunities in China are also attractively valued and may offer high dividend yields making the risk reward still favorable 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. Longer term, we expect Chinese stock prices may be less influenced by macro forces such as regulatory intervention and inflation fears and more influenced by company fundamentals and secular growth. Given the weaker performance of some sectors, valuations in China are also quite attractive in a global context. We remain focused on the longer-term fundamentals of the domestic growth engine and believe there are many opportunities in China that stand to benefit from the country›s efforts at increased domestic self-sufficiency across a myriad of industries.

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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