Trans-Pacific Trade Boosts Matthews Asia

03/05/2015 10:00 am EST


Khoa Nguyen

Investment Analyst, Investing Daily

My current home—Ho Chi Minh City, Vietnam—has changed a lot in the recent years; total foreign investment in Vietnam has jumped from only about $170 million in 2010 to nearly $4.5 billion in 2013, explains Khoa Nguyen, contributing editor to Investing Daily’s Personal Finance.

This amount of foreign investment will no doubt intensify when Vietnam, along with other emerging countries, sign the Trans-Pacific Partnership (TPP).

While the specifics haven’t been disclosed, the goal of this trade program is to reduce trade barriers among participating countries, introduce transparency, and provide a framework for drafting regulations resolving disputes for things such as intellectual property.

These member nations are Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the US, and Vietnam. Combined, these 12 countries represent about 782 million people and about 39% of the world’s economy.

Matthews Asia Growth (MPACX) offers major coverage of TPP nations, with about 44.7% of its assets in emerging Asian countries and another 44.2% devoted to Japan, for a total of about 88.9% of its assets.

The fund is run by Taizo Ishida and Sharat Shroff, a proven management team that has consistently outperformed industry peers since taking the fund’s reins in 2007.

In the past seven years, Matthews’ returns have outpaced its category average all but one year. Its three-year average return of 11.1% soundly beat both its benchmark and category.

Matthews’ five-year average performance was even greater—10.5% growth—compared with 6.4% for its benchmark and 6.9% for its peer group.

This strong performance has helped Matthews Asia Growth Fund achieve a top 4% ranking of diversified Asia-Pacific funds over the past five years.

The fund’s assets are largely focused on consumer spending, with about 24.5% in consumer staples and another 20% in consumer defensive stocks, which is driven by economic growth. The fund also focuses on other support industries, such as industrials (15.8% of assets) and the financial industry (12.2%).

The fund does not make portfolio picks lightly. This is shown in its low turnover rate of 11%, compared with a category average of 90%. With a beta of 0.85, the fund is also less volatile relative to its benchmark.

Of the fund’s 74 holdings, none makes up more than 5% of its total assets. Among the top five holdings are three Japanese companies: leading car manufacturer Toyota Motors, financial services firm Orix, and medical-equipment manufacturer Sysmex.

Another of its top holdings, John Keells Holdings, is Sri Lanka’s largest listed company and manages various business linked to leisure, transportation, and financial services in the island nation.

The fund has a 1.12 expense ratio and a modest yield of 1.82%. Matthews Asia Growth remains a great way to gain broad exposure to Asia’s emerging markets potential.

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