The Matthews China Fund (Trades, Portfolio), which was founded in 1998 and is known to invest four-fifths of its assets in Chinese companies, broke with that tradition to an extent in the fourth quarter of 2014.
While the Fund did add two new Chinese companies – Kweichow Moutai Co Ltd (600519.China) and Jiangsu Hengrui Medicine Co Ltd (600276.China) – to its portfolio, it was more active selling all or part of many of its Asian stakes in the fourth quarter.
Divestitures and reductions
The Fund sold its stakes in two Hong Kong stocks – China Life Insurance Co Ltd (02628.Hongkong) and Digital China Holdings Ltd (00861.Hongkong) – in the fourth quarter.
The divestiture of the Fund’s 5,084,000-share stake in China Life Insurance Co, a Beijing-based provider of life insurance and annuity products, was achieved for an average price of HK$24.49 per share. The transaction had a -1.4% impact on the Fund’s portfolio.
Digital China, which was created from Legend Holdings which became Lenovo Group Ltd (00992.Hongkong), seeks to be a one-stop shop for IT services that can benefit many industries. The Fund sold its 2,843,000-share stake in Digital China for an average price of HK$6.91 per share. That transaction had a -0.24% impact on the Fund’s portfolio.
Lenovo is the 10th-largest stake in the Fund’s portfolio.
The Fund also sold portions of its holdings in 28 other Hong Kong stocks – including portions of its stakes in some of the largest companies in China.
The greatest impact on its portfolio was felt by its sale of 7,176,000 shares of Lenovo Group Ltd, a computer technology company with offices in Beijing and North Carolina, for an average price of HK$10.83. That had a -1.01% impact on the Fund’s portfolio.
Two other gurus – Matthews Pacific Tiger Fund (Trades, Portfolio) and Value Partners (Trades, Portfolio) – have shares of Lenovo in their portfolios.
The second-greatest impact to the Fund’s portfolio was felt by the sale of 1,735,600 shares of Sinopharm Group Co Ltd (01099.Hongkong), China’s largest pharmaceutical company, for an average price of HK$28.96 per share. That transaction had a -0.61% impact on the Fund’s portfolio.
The Matthews Pacific Tiger Fund and Value Partners also have shares of Sinopharm in their portfolios.
The Fund sold 5,071,000 shares of Golden Eagle Retail Group Ltd (03308.Hongkong), a Chinese company primarily involved in commercial real estate development and the fashion retail business, for an average price of HK$9.38 per share. That transaction had a -0.56% impact on the Fund’s portfolio.
Golden Eagle is currently the 20th-largest stake in the Fund’s portfolio.
A similar impact on the Fund’s portfolio was felt by the sale of 19,540,000 shares of Kingdee International Software Group Co Ltd (00268.Hongkong), a provider of enterprise management software and Cloud services, for an average price of HK$2.44 per share. The sale had a -0.55% on the Fund’s portfolio.
Even with the sale of the stock, Kingdee remains the largest stake in the Fund’s portfolio.
Wasatch International Growth (Trades, Portfolio) also has shares of Kingdee in its portfolio.
The Fund also sold portions of its stakes in China Mengniu Dairy Co Ltd (02319.Hongkong), China Merchants Holdings (International) Co Ltd (00144.Hongkong), Hang Lung Group Ltd (00010.Hongkong), China Longyuan Power Group Corp Ltd (00916.Hongkong), China Communications Services Corp Ltd (00552.Hongkong), Hong Kong and China Gas Co Ltd (00003.Hongkong), Tsingtao Brewery Co Ltd (00168.Hongkong), Cafe de Coral Holdings Ltd (00341.Hongkong), Dongfeng Motor Group Co Ltd (00489.Hongkong), Swire Pacific Ltd (00019.Hongkong), CSR Corp Ltd (01766.Hongkong), ZTE Corp (00763.Hongkong), Hengan International Group Co Ltd (01044.Hongkong), Belle International Holdings Ltd (01880.Hongkong), Hong Kong Exchanges and Clearing Ltd (00388.Hongkong), Sun Art Retail Group Ltd (06808.Hongkong), Kunlun Energy Co Ltd (00135.Hongkong), Cheung Kong Infrastructure Holdings Ltd. (01038.Hongkong), China Oilfield Services Ltd (02883.Hongkong), CNOOC Ltd (00883.Hongkong), Tingyi (Cayman Islands) Holding Corp (00322.Hongkong), Tencent Holdings Ltd (00700.Hongkong), Air China Ltd (00753.Hongkong) and Ping An Insurance Group (02318.Hongkong).
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