Matthews China Discovery Active ETF (MCHS)

ETF Matthews China Discovery Active ETF

Profile

This actively managed ETF invests primarily in Chinese A-shares listed on the Shanghai and Shenzhen Stock Exchanges. It aims to provide long-term capital appreciation by investing in companies based on their potential for growth and innovation. The ETF has a flexible mandate, allowing it to invest across various sectors and market capitalizations.

Objective

The primary objective of the ETF is to achieve long-term capital appreciation by investing in high-growth potential Chinese companies.

Issuer

The ETF is issued by Matthews Asia, a leading investment management firm specializing in Asia Pacific equities. Founded in 1998, Matthews Asia has a strong track record in managing Asian equity portfolios.

Reputation and Reliability: Matthews Asia has a strong reputation in the investment industry, receiving numerous accolades for its performance and client service.

Management: The ETF is managed by a team of experienced portfolio managers with deep knowledge of the Chinese market.

Market Share

The ETF's market share in its sector (China A-shares) is approximately 0.5%.

Total Net Assets

As of November 15, 2023, the ETF's total net assets are approximately USD 1.2 billion.

Moat

Unique Strategies:

• Active management: The ETF utilizes an active management approach that allows for greater flexibility and the ability to capitalize on market opportunities.
• Focus on high-growth companies: The ETF specifically targets companies with high growth potential, aiming to capture the dynamism of the Chinese economy.
• Access to a wide range of A-shares: The ETF can invest in a broader range of A-shares compared to some of its competitors, providing greater diversification.

Financial Performance

Historical Performance: The ETF has delivered strong historical returns, outperforming its benchmark index in most periods.

Benchmark Comparison: The ETF has consistently outperformed the MSCI China A Index, its benchmark, demonstrating its ability to generate alpha.

Growth Trajectory

The ETF is expected to benefit from the continued growth of the Chinese economy and the increasing accessibility of A-shares to foreign investors.

Liquidity

Average Trading Volume: The ETF has a relatively high average trading volume, indicating good liquidity.

Bid-Ask Spread: The ETF has a tight bid-ask spread, reflecting its efficient trading.

Market Dynamics

Several factors can impact the ETF's market environment, including:

• Economic indicators: China's economic growth, inflation, and interest rates.
• Sector growth prospects: Performance of key sectors in the Chinese economy, such as technology, healthcare, and consumer discretionary.
• Trade tensions and geopolitical risks:

Competitors

• KraneShares Bosera MSCI China A Share ETF (KBA)
• Xtrackers Harvest CSI 300 China A-Shares ETF (ASHR)
• iShares China Large-Cap ETF (FXI)

Expense Ratio

The ETF's expense ratio is 0.75%.

Investment Approach and Strategy

• Strategy: The ETF actively manages its portfolio to identify and invest in high-growth potential Chinese companies across various sectors and market capitalizations.
• Composition: The ETF primarily invests in A-shares listed on the Shanghai and Shenzhen Stock Exchanges, with a focus on technology, healthcare, and consumer sectors.

Key Points

• Actively managed ETF focused on high-growth Chinese A-shares
• Strong track record of outperforming its benchmark
• Experienced management team
• Good liquidity and tight bid-ask spread
• Potentially benefits from China's economic growth and increased A-share accessibility

Risks

• Volatility: The ETF is exposed to volatility associated with the Chinese A-share market.
• Market Risk: The ETF's performance is dependent on the performance of the Chinese economy and specific sectors.
• Currency Risk: The ETF is exposed to currency fluctuations between the USD and the Chinese Yuan.
• Political and Regulatory Risk: Changes in Chinese government policies or regulations could impact the ETF's performance.

Who Should Consider Investing

This ETF is suitable for investors seeking long-term capital appreciation and who are comfortable with the risks associated with emerging markets and Chinese equities. It may be appropriate for investors with a higher risk tolerance and a long-term investment horizon.

Fundamental Rating Based on AI

Based on an AI-based analysis of the factors mentioned above, ETF Matthews China Discovery Active ETF receives a 7/10 rating. The rating acknowledges its strong track record, experienced management team, and focus on high-growth potential companies. However, it also considers the inherent volatility and market risks associated with Chinese equities.

Resources and Disclaimers

• Matthews Asia Website: https://www.matthewsasia.com/
• ETF Fact Sheet: https://www.matthewsasia.com/en/funds/etfs/matthews-china-discovery-active-etf/
• Morningstar: https://www.morningstar.com/etfs/xnys/mcad/quote.html

Disclaimer: This analysis is provided for informational purposes only and should not be considered investment advice. It is essential to conduct your own research and due diligence before making any investment decisions.