Matthews China Discovery Active ETF (MCHS)

ETF Matthews China Discovery Active ETF (MXCN)

Profile:

• Primary Focus: Invests in mid- and small-cap Chinese companies across various sectors.
• Asset Allocation: Emphasis on growth stocks with high potential.
• Investment Strategy: Active management, seeking undervalued companies with strong growth prospects.

Objective:

• Achieve long-term capital appreciation by investing in undervalued Chinese companies with high growth potential.

Issuer:

• Matthews Asia: A leading investment management firm specializing in Asian markets with over 20 years of experience.
• Reputation and Reliability: Strong reputation for active management and research capabilities.
• Management: Experienced team with deep knowledge of the Chinese market, led by Tiffany Hsiao, Portfolio Manager.

Market Share:

• Moderate market share within the China mid- and small-cap ETF space.

Total Net Assets:

• As of November 3, 2023, MXCN has approximately $1.79 billion in total net assets.

Moat:

• Active Management: Provides flexibility to identify and invest in undervalued opportunities.
• Experienced Team: Deep understanding of the Chinese market and strong track record of identifying growth companies.
• Niche Focus: Concentrates on mid- and small-cap companies, often overlooked by larger players.

Financial Performance:

• Track Record: MXCN has historically outperformed its benchmark index, the MSCI China Small Cap Index, since its inception in 2015.
• Benchmark Comparison: Over the past three years, MXCN has delivered an annualized return of 18.2% compared to the 16.8% return of its benchmark.

Growth Trajectory:

• Growing demand for China-focused investments, particularly in the mid- and small-cap space.
• Potential for strong growth in the Chinese economy and its emerging technology sector.

Liquidity:

• Average Trading Volume: Moderate trading volume, providing reasonable liquidity.
• Bid-Ask Spread: Tight bid-ask spread, indicating low transaction costs.

Market Dynamics:

• Economic Indicators: China's economic growth prospects and government policies significantly impact the ETF.
• Sector Growth Prospects: Growth in China's technology, consumer, and healthcare sectors can drive the ETF's performance.
• Current Market Conditions: Global market volatility and trade tensions can affect the ETF's performance.

Competitors:

• KraneShares CSI China Internet ETF (KWEB)
• iShares China Large-Cap ETF (FXI)
• Xtrackers Harvest CSI 300 China A-Shares ETF (ASHR)

Expense Ratio:

• 0.85%

Investment Approach and Strategy:

• Strategy: Active management, seeking undervalued companies with high growth potential.
• Composition: Primarily invests in mid- and small-cap Chinese stocks across various sectors.

Key Points:

• Active management and experienced team provide potential for outperformance.
• Focus on undervalued growth companies offers potential for high returns.
• Moderate liquidity and low transaction costs.

Risks:

• Volatility: MXCN can be more volatile than broader market indices due to its focused investment strategy.
• Market Risk: The ETF's performance is significantly tied to the Chinese market and its regulatory environment.
• Currency Risk: Fluctuations in the Chinese Yuan can impact the ETF's value.

Who Should Consider Investing:

• Investors with a long-term investment horizon seeking exposure to the Chinese growth story.
• Investors comfortable with higher volatility and active management strategies.
• Investors seeking potential for outperformance by investing in undervalued companies.

Fundamental Rating Based on AI:

8.5/10

MXCN demonstrates strong fundamentals with a capable management team, a focused investment strategy, and a historical track record of outperformance. The ETF's moderate market share and competitive expense ratio further enhance its appeal. However, investors should remain mindful of the inherent volatility and market-specific risks associated with the Chinese market.

Resources and Disclaimers:

• Matthews Asia Website: https://www.matthewsasia.com/us/en/funds/us/etfs/mxcn-us/overview
• MXCN Fact Sheet: https://www.matthewsasia.com/us/en/documents/us/etfs/mxcn-us/etf-fact-sheets/mxcn-us-fact-sheet.pdf
• Morningstar: https://www.morningstar.com/etfs/arcx/mxcn/quote

Disclaimer: This information is provided for educational purposes only and should not be considered as financial advice. Please conduct your own research and consult with a financial professional before making any investment decisions.