This afternoon, I participated in a webcast involving the director of research and two portfolio managers from the Matthews Asian Funds. We’ve owned the Matthews Asian Growth and Income Fund (Symbol: MACSX) for many years in our portfolios. While nothing in our portfolio is “sacred,” we view the fund as an excellent way to gain access to the fast-growing Asian region of the world. It doesn’t hurt that the fund’s performance has been oustanding, either (see chart below).
The Matthews investment team continues to be very positive on the longer-term prospects for the Asian region as a whole, which may not come as a huge surprise. However, they aren’t blindly bullish, either. They readily admit that it may be a rocky ride from time to time as those economies mature. As far as the current backdrop, they’re a little cautious because valuations have risen as stocks have rebounded over the past year.
Looking forward, they’re expecting certain companies and industries that are dramatically underweight in most Asian indexes to benefit as those economies transition away from being heavily manufacturing dependent and towards more of a service orientation, like most western economies. They specifically mentioned health care as being one of the significantly underrepresented areas that stands to benefit from such a transformation. In that regard, they warned of the “backward looking” nature of most index-type approaches that focus on the Asian region.
Chart: MACSX (red line) vs. S&P 500 (blue line) for the past decade
