The market-beating Matthews Fund chose three new Hong Kong and China-based securities and significantly increased three holdings in the fourth quarter, its portfolio showed this week.
The Matthews China Fund (Trades, Portfolio) started in 1998 and has since soundly outpaced its benchmark MSCI China Index with an average return of 8.55% compared to 3.15%. Despite sustained economic growth in China, it has had some underperformance in the near term, declining 5.18% in 2016 compared to a 1.11% return in the index.
Weakness in the consumer discretionary and real estate sectors hurt the fund the most, managers said in a fourth-quarter letter to shareholders. The MSCI China Consumer Discretionary Index dipped 3.31% for the year, with a heavy weighting in internet and direct market retail, automobile manufacturing and restaurant sub-industries. One of Matthews China Fund (Trades, Portfolio)’s biggest detractors, JD.com, is the top constituent of the index. The index popped in the first month of the year with a return of 6.84%, beating the 5.69% return in the MSCI China Index.
The top new buys of the Matthews China Index were: Brilliance China Automotive Holdings Ltd. (HKSE:01114, Financial), China Railway Construction Corp. Ltd. (HKSE:01186, Financial) and Wuliangye Yibin Co. Ltd. (SZSE:000858, Financial). It increased Seminconductor Manufacturing International Corp. (HKSE:00981, Financial), Xinyi Glass Holdings Ltd. (HKSE:00868) and Baidu Inc. (BIDU).
Brilliance China Automotive Holdings Ltd. (HKSE:01114, Financial)
The fund bought 7,786,000 shares of Brilliant China Automotive Holdings, a 2.08% portfolio weight. The stock’s average price for the quarter was 10 Hong Kong dollars.
Brilliance China Automotive Holdings Ltd has a market cap of $54.2 billion; its shares were traded around $10.60 with a P/E ratio of 13.45 and P/S ratio of 9.29. The trailing 12-month dividend yield of Brilliance China Automotive Holdings Ltd stocks is 1.02%. The forward dividend yield of Brilliance China Automotive Holdings Ltd stocks is 1.02%. Brilliance China Automotive Holdings Ltd had an annual average earnings growth of 21.70% over the past 5 years.
China Railway Construction Corp. Ltd. (HKSE:01186, Financial)
The fund bought 4,007,000 shares of China Railway Construction Corp. Ltd., a 1% portfolio weight. The stock’s average price for the quarter was 10 Hong Kong dollars.
China Railway Construction Corp Ltd has a market cap of $146.66 billion; its shares were traded around $10.72 with a P/E ratio of 12.65 and P/S ratio of 0.27. The trailing 12-month dividend yield of China Railway Construction Corp Ltd stocks is 1.64%. The forward dividend yield of China Railway Construction Corp Ltd stocks is 1.64%. China Railway Construction Corp Ltd had an annual average earnings growth of 21.20% over the past 10 years. GuruFocus rated China Railway Construction Corp Ltd the business predictability rank of 3-star.
Wuliangye Yibin Co. Ltd. (SZSE:000858, Financial)
The fund bought 884,949 shares of Wuliangye Yivin Co. Ltd., a 0.85% portfolio weight. The stock’s average price for the quarter was 35 yuan.
Wuliangye Yibin Co Ltd has a market cap of $140.45 billion; its shares were traded around $37.00 with a P/E ratio of 21.02 and P/S ratio of 5.80. The trailing 12-month dividend yield of Wuliangye Yibin Co Ltd stocks is 2.16%. The forward dividend yield of Wuliangye Yibin Co Ltd stocks is 2.16%. Wuliangye Yibin Co Ltd had an annual average earnings growth of 20.70% over the past 10 years. GuruFocus rated Wuliangye Yibin Co Ltd the business predictability rank of 2-star.
Seminconductor Manufacturing International Corp. (HKSE:00981, Financial)
The fund increased its holding in Semiconductor Manufacturing International Corp. by 868.8%, buying 8,124,940 shares for a total of 9,060,100. The stock had a 2.76% portfolio weight and average price per share of 10 Hong Kong dollars.
Semiconductor Manufacturing International Corp has a market cap of $44.14 billion; its shares were traded around $10.52 with a P/E ratio of 13.39 and P/S ratio of 2.31.
Xinyi Glass Holdings Ltd. (HKSE:00868)
The fund increased its holding of Xinyi Glass Holdings Ltd. by 292.4%, buying 11,490 shares for a total of 11.49 million. The stock had a 1.82% portfolio weight and average price per share of 6 Hong Kong dollars.
Xinyi Glass Holdings Ltd has a market cap of $27.59 billion; its shares were traded around $6.90 with a P/E ratio of 11.11 and P/S ratio of 2.46. The trailing 12-month dividend yield of Xinyi Glass Holdings Ltd stocks is 4.78%. The forward dividend yield of Xinyi Glass Holdings Ltd stocks is 4.78%. Xinyi Glass Holdings Ltd had an annual average earnings growth of 22.00% over the past 10 years. GuruFocus rated Xinyi Glass Holdings Ltd the business predictability rank of 2.5-star.
Baidu Inc. (BIDU)
The fund increased its holding of Baidu Inc. by 138.8%, buying 37,600 shares for a total of 64,700. The stock had a 2.07% portfolio weight and an average price per share of $170.
Baidu Inc. has a market cap of $60.15 billion; its shares were traded around $173.40 with a P/E ratio of 12.43 and P/S ratio of 5.57. Baidu Inc. had an annual average earnings growth of 72.20% over the past 10 years. GuruFocus rated Baidu Inc. the business predictability rank of 4-star.
See Matthews China Fund (Trades, Portfolio)’s portfolio here.
