The Matthews China Small Companies Fund (MCSMX) will seek long-term capital appreciation by investing in stocks with market capitalizations generally under US$3 billion in China, Hong Kong and Taiwan.
Investing in small companies, especially in foreign markets, is open to greater risk and volatility than larger corporations, the company said. “While large state-owned enterprises have long dominated China’s investment universe, we are seeing small companies benefiting from the country’s shift to a market economy,” said Richard Gao, the Fund’s lead manager, adding that “small companies often provide opportunities for higher growth at lower valuations.” The number of publicly listed small companies in China (excluding A shares, which are generally not available to foreign investors) has nearly doubled in the past five years and now exceeds 1,000.
The Fund will be co-managed by Henry Zhang, CFA, and is the firm’s third dedicated China strategy (Matthews China and Matthews China Dividend Funds being the first two).
“In our view, the world’s most populous country is an asset class in itself and affords the opportunity to pursue a variety of strategies,” said Matthews Chief Investment Officer, Robert Horrocks. “We are excited to be able to offer a new strategy with which investors can access China’s rapidly expanding universe of small companies.”