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SICAV

Asian ex-Japan Equity Fund

A diversified fund, with a focus on sustainable growth.

ISIN LU0266341725 WKN A0MKKA

3YR Return Annualised
(View Total Returns)

Total Assets
(USD)

7.99%
$584.6m

1YR Return
(View Total Returns)

Manager Tenure

5.80%
10yrs

Information Ratio
(5 Years)

Tracking Error
(5 Years)

0.27
3.90%

Inception Date 13-Dec-2006

Performance figures calculated in USD

Other Literature

30-Sep-2019 - Anh Lu, Portfolio Manager,
We remain constructive on the outlook for Asia ex-Japan equities, which is supported by broad economic stability, cushioned by policy easing across the region. The U.S.-China trade conflict remains a key risk, but Asian economies are holding up. We believe the worst of the earnings downgrades is over although upward revisions of earnings expectations may be muted in the near term, particularly in the absence of a conclusive resolution to the trade discord.
Anh Lu
Anh Lu, Portfolio Manager

Anh Lu is a portfolio manager in the Equity Division of T. Rowe Price Hong Kong Limited. Ms. Lu is the lead portfolio manager for the Asia ex-Japan Equity Strategy. She is a vice president of T. Rowe Price Group, Inc. and T. Rowe Price Hong Kong Limited.

 

Strategy

Investment Objective

To increase the value of its shares, over the long term, through growth in the value of its investments. The fund invests mainly in a diversified portfolio of stocks of companies in Asia (excluding Japan).

Investment Approach

  • Employ fundamental analysis to identify companies with sustainable above-market earnings growth rates.
  • Focus on franchise strength, management team quality, free cash flow, and financing/balance sheet structure.
  • Verify relative valuation appeal versus both local market and region.
  • Apply negative screening for macroeconomic and political factors to temper bottom-up enthusiasm for specific securities.

Portfolio Construction

  • 80-120 stock portfolio
  • Individual positions typically range from 0.40% to 5.00% - average position size of 1.00%
  • Country and sector weightings a residual of stock selection. Significant deviations expected.
  • Reserves range from 0% to 10%, but typically less than 5%

Performance (Class I)

Annualised Performance

  1 YR 3 YR
Annualised
5 YR
Annualised
10 YR
Annualised
Since Manager Inception
Annualised
Fund % 5.80% 7.99% 5.27% 6.89% 8.58%
Indicative Benchmark % -3.44% 6.32% 4.23% 5.52% 7.08%
Excess Return % 9.24% 1.67% 1.04% 1.37% 1.50%

Inception Date 13-Dec-2006

Manager Inception Date 31-May-2009

Indicative Benchmark: MSCI All Country Asia ex Japan Index Net

Data as of  30-Sep-2019

  1 YR 3 YR
Annualised
5 YR
Annualised
10 YR
Annualised
Fund % 5.80% 7.99% 5.27% 6.89%
Indicative Benchmark % -3.44% 6.32% 4.23% 5.52%
Excess Return % 9.24% 1.67% 1.04% 1.37%

Inception Date 13-Dec-2006

Indicative Benchmark: MSCI All Country Asia ex Japan Index Net

Data as of  30-Sep-2019

Performance figures calculated in USD

Recent Performance

  Month to DateData as of 16-Oct-2019 Quarter to DateData as of 16-Oct-2019 Year to DateData as of 16-Oct-2019 1 MonthData as of 30-Sep-2019 3 MonthsData as of 30-Sep-2019
Fund % 2.38% 2.38% 16.30% 3.06% -0.30%
Indicative Benchmark % 2.64% 2.64% 8.51% 1.67% -4.50%
Excess Return % -0.26% -0.26% 7.79% 1.39% 4.20%

Inception Date 13-Dec-2006

Indicative Benchmark: MSCI All Country Asia ex Japan Index Net

Indicative Benchmark: MSCI All Country Asia ex Japan Index Net

Performance figures calculated in USD

Past performance is not a reliable indicator of future performance.  Source for fund performance: T. Rowe Price. Fund performance is calculated using the official NAV with dividends reinvested, if any. The value of an investment and any income from it can go down as well as up. Investors may get back less than the amount invested. It will be affected by changes in the exchange rate between the base currency of the fund and the subscription currency, if different. Sales charges (up to a maximum of 5% for the A Class), taxes and other locally applied costs have not been deducted and if applicable, they will reduce the performance figures. 

Where the base currency of the fund differs from the share class currency, exchange rate movements may affect returns.

Returns shown with reinvestment of dividends after the deduction of withholding taxes. 

Effective 1 July 2018, the "net" version of the indicative benchmark replaced the "gross" version of the indicative benchmark. The "net" version of the indicative benchmark assumes the reinvestment of dividends after the deduction of withholding taxes applicable to the country where the dividend is paid; as such, the returns of the new benchmark are more representative of the returns experienced by investors in foreign issuers. Historical benchmark performance has been restated accordingly. 

30-Sep-2019 - Anh Lu, Portfolio Manager,
Asia ex-Japan equities rose in September as news that the U.S. and China will resume trade talks in October boosted investor sentiment. Markets gained after the U.S. Federal Reserve reduced interest rates and raised the prospect of another cut. Indian equites outperformed after the surprise corporate tax rate reduction and our stock selection in this market, particularly in HDFC Bank and Kotak Mahindra Bank, benefited the portfolio. We view these banks as high-quality names in the retail lending space. Our stock selection in Taiwan, which advanced on technology stock gains, also lifted returns. Largan Precision shares recovered after the high-precision handset camera lens maker reported record August sales and raised expectations that positive sales growth momentum would continue with the launch of the new iPhones. In contrast, our stock choices in consumer staples hurt. Owning Yixintang Pharmaceutical curbed returns on weak second-quarter results brought about by a new policy regulation in Yunnan, a southwestern Chinese province where the company dominates the local market. We believe that the worst is behind Yixintang, although it will still need to invest in attracting pharmacists to support expansion plans. We think Yixintang will benefit from China’s rising health care spending and sector consolidation.

Holdings

Total
Holdings
78
Largest Holding Tencent Holdings 6.80% Was (30-Jun-2019) 7.00%
Other View Full Holdings Quarterly data as of 30-Sep-2019
Top 10 Holdings 42.80% View Top 10 Holdings Monthly data as of 30-Sep-2019

Largest Top Contributor^

Taiwan Semiconductor Manufacturing
By 3.44%
% of fund 5.71%

Largest Top Detractor^

Tencent Holdings
By -2.68%
% of fund 6.83%

^Absolute

Quarterly Data as of 30-Sep-2019

Top Purchase

Taiwan Semiconductor Manufacturing
5.70%
Was (30-Jun-2019) 3.85%

Top Sale

Hangzhou Hikvision Digital Technology (E)
0.00%
Was (30-Jun-2019) 1.02%

Quarterly Data as of 30-Sep-2019

30-Jun-2019 - Anh Lu, Portfolio Manager,

China remained our largest country position in the quarter but as a result of our bottom-up approach we eliminated some of positions in favor of companies with better earnings acceleration, more solid management, and more attractive valuations. Despite the lingering trade tensions between the U.S. and China, we continue to believe in the China story as free cash flows continue to accelerate and stocks are trading at more convincing valuations. We have fairly high exposure to Chinese state-owned enterprises compared with our historical positions, but our focus lies on companies with changes in the quality of management through new incentive programs that are aligned with shareholder interests.

We turned more overweight to India, which emerged as the biggest relative country overweight at the end of the second quarter, by adding to our existing positions in attractive financials and industrials names. We view the landslide re-election of Prime Minister Narendra Modi and the ruling Bharatiya Janata Party as positive for macro stability. It will also likely boost confidence in the capital markets, which is significant given the recent concerns about non-bank financial companies. We think that the positions we added will likely benefit from a future recovery in the capital expenditure cycle.

Within the greater China markets, we reduced our underweight to Taiwan. In Taiwan, we found idiosyncratic ideas which are not reliant on the Apple supply chain. In Hong Kong, where we remained underweight, we added to our exposure to high-quality and defensive names. Across the region's markets, Taiwan is our largest relative underweight followed by South Korea.

Within Southeast Asia, we continued to be selective and are finding that the regulatory environment is improving in many markets. In the quarter, we established a position in a Philippine utility and added to our exposure in a Vietnamese company that we own.

From a sector perspective, the portfolio retains its preference for domestic consumption or income-related opportunities such as consumer staples and communication services. The consumer staples sector continues to be the portfolio's largest relative overweight followed by communication services, where we turned more overweight in the quarter. We continue to be more judicious about our technology investments, focusing on companies exposed to the new growth areas.

In financials and IT, our two biggest sector positions in absolute terms, we turned overweight. In financials, we started positions in companies with recovering return-on-equities and margins while in IT we invested in companies that are poised to benefit from product cycles.

In general, companies that are boosting their innovation capabilities in areas such as health care, automotive, home appliances, robotics, environment, and other consumer applications are the ones of interest to us. We continue to favor companies that are gaining market share and those that will benefit from pricing changes and industry consolidation. We see value in companies with improving fundamentals due to capital expenditure (capex) discipline.

Reduced our Overweight to China

Although we trimmed our overweight to China, we continue to stay well diversified in this market by investing in new health care, insurance, industrials and business services, and consumer staples names. We also retained our existing holdings in IT and communication services.

Within the Chinese consumer staples space, we closed our positions in Tsingtao Brewery, China's second- largest brewery due to its low margins, more difficult-than-expected turnaround, and the competitive dynamics in the sector. This has been exacerbated by China Resources Beer catering to the mass market and the entry of Anheuser-Busch Inbev, which is seeking to list its Asian subsidiary in Hong Kong. We also exited liquor make Sichuan Swellfun on valuation grounds, increasing competition and rising channel inventories.

However, outside of the beverage sector, we started positions in Yixintang Pharmaceutical, and Jiajiayue Group. Yixingtang is a non-state-owned enterprise pharmacy chain, which is looking to become the leading player in Southwest China, home to about 200 million people. Its dominance in the Yunnan province provides it with a solid profit base for which to expand to nearby regions. We view Yixintang as a low-beta growth compounder and its relationship with Alibaba provides additional value. China's pharmacy retail sector offers exposure to the country's rising health care spending with lower policy risks.

We see Jiajiayue, which is a food retailer with a focus on fresh products, as an earnings compounder in a defensive sector. It is a durable share gainer in China's food retail sector with a recurring free cash flow. We think that this fresh food segment will have less pressure from the rapid growth of ecommerce given that the supply chain is longer and more complicated. So far, there is no successful mass-market fresh food ecommerce player in China.

In the real estate sector, we exited China Vanke, following its share bounce, and China Overseas Property as we decided to focus on the companies within the sector that are showing more earnings acceleration this year and in 2020, such as Shimao Property and China Overseas Land and Investment.

Within China health care, we eliminated Jiangsu Hengrui and trimmed our stake in Wuxi Biologics. In April, we cut our holdings in Chinese cyclical companies, select health care names with demanding valuations, such as Hengrui, a biopharmaceutical company that caters to China's oncology market.

Turned More Overweight India on Valuation Grounds

We turned more overweight India in the second quarter after a brief period of underweighting this market in 2018. We added to our existing position in Axis Bank a private lender, which is showing signs of an improvement in its pre-provision operating profit margin under new senior management. We also increased our exposure to Voltas, a leading cooling appliance maker, which has a net cash balance sheet and strong corporate governance, and which we expect to benefit from the low penetration of air conditioners in India.

We remain comfortable with our financial holdings in India and we think there will be investment opportunities until the issues concerning the nonbank financial companies are completely resolved. We believe high-quality private banks in India will be the first beneficiaries of an eventual revival in the capital expenditure cycle. We like banks with strong franchises, which should be able to capture market share from lower-quality state banks. As mentioned, we have positions in HDFC Bank and KMB, which we see as historically well-managed lenders that have done well even in periods of volatility.

We Pared our Taiwan Underweight

We started a position in MediaTek, a fabless semiconductor company, which has been shunned by market participants as it was seen to be affected by the tapering demand for handset and the slower replacement cycle. MediaTek, however, recognized its smartphone revenue dependence and diversified into segments that offer more growth. We believe that new product cycles involving the Internet of Things and 5G will drive MediaTek's margin improvement and core profit growth over the next two years. Its first-quarter results with better-than-expected gross margin due to an improving mix and cost structure indicated a turnaround story for MediaTek. As a result, we reduced our underweight to Taiwan.

In Hong Kong, we opened a position in Hansoh Pharmaceuticals, one of the high-quality pharmaceutical companies in China, by participating in its Hong Kong initial public offering. Hansoh has a diversified drug portfolio and we think its favorable product cycle over the next years will help earnings compound. We remained underweight Hong Kong.

We Tapped Opportunities in Southeast Asia

In Southeast Asia, particularly in the Philippines, we initiated a position in Manila Water, which provides water services to the eastern side of Metro Manila, under a 40-year concession agreement. The water company traded below its intrinsic value due to a water shortage. We believe that the eventual solution to the water shortage issue along with potential tax recovery may provide a significant boost. We like its tariff framework and we see long-term value in its overseas projects in Vietnam and Thailand.

In Vietnam, we added to our position in Joint Stock Commercial Bank for Foreign Trade of Vietnam, commonly referred to as Vietcombank, which is a state-owned enterprise bank that has been improving its credit quality with better net interest margins as it targets consumer lending. We view Vietnam as a country with positive long-term growth prospects and Vietcombank will likely benefit from its continued urbanization.

We Turned Overweight to Financials, Industrials, and IT

We became overweight financials as we started investing in in PICC Property and Casualty, the country's biggest property and casualty insurer. We believe that PICC's new chairman will seek to improve the productivity of its salesforce. Moreover, we think that PICC's return-on-equity will likely benefit from the regulator's crackdown on industry acquisition costs and reforms on the tax rate cap on commissions. Its earnings may likely improve because of the shift away from auto insurance. Aside from this Chinese insurer, we also added to our existing stake in India's Axis Bank as earlier discussed.

Within industrials, we established positions in Shenzhen Inovance, which produces inverters and controllers and is expanding into factory automation and electric vehicles. We expect this company to gain market share in China's growing automation market.

In IT, the new position in MediaTek and the increase in our Samsung Electronics stake turned us overweight to this sector. Samsung Electronics, one of the world's biggest memory chipmakers, is poised to benefit from a recovery in the DRAM cycle and may gain from the U.S. restrictions on China-based technology company Huawei in terms of short-term handset sales. The DRAM cycle may start to stabilize from the second half of 2019 and recovery will be driven by decreasing inventory and rising demand for artificial intelligence-related applications, cloud gaming, the 5G cycle, and new server platforms.

We Became Underweight to Consumer Discretionary

We shifted to a relative underweight in consumer discretionary from an overweight position in the first quarter. Our elimination of LG Electronics from the portfolio contributed to this allocation change. We decided to lock in gains after LG Electronics shares reacted to talk that it may be among the beneficiaries of the U.S. restrictions on Huawei. Its mobile division has been a key concern for us given the intense competition in the sector and the slowdown in demand.

In consumer discretionary, we�trimmed Huayu Automotive Systems, an auto component manufacturer, following sharp gains for most of the first half of the year.��

Sectors

Total
Sectors
10
Largest Sector Financials 23.72% Was (31-Aug-2019) 23.08%
Other View complete Sector Diversification

Monthly Data as of 30-Sep-2019

Indicative Benchmark: MSCI All Country Asia ex Japan Index (unhedged)

Top Contributor^

Financials
Net Contribution 0.84%
Sector
-0.01%
Selection 0.84%

Top Detractor^

Utilities
Net Contribution -0.07%
Sector
0.01%
Selection
-0.08%

^Relative

Quarterly Data as of 30-Sep-2019

Largest Overweight

Consumer Staples
By5.35%
Fund 10.73%
Indicative Benchmark 5.38%

Largest Underweight

Materials
By-4.42%
Fund 0.00%
Indicative Benchmark 4.42%

Monthly Data as of 30-Sep-2019

30-Sep-2019 - Anh Lu, Portfolio Manager,
We started a position in a Hong Kong-listed financial stock following recent share price weakness as a result of the anti-government protests that have persisted for months. We believe the stock is reasonably valued and that it is less vulnerable to policy risk than property or banking names. While we think the company’s recent overseas acquisition bid could be dilutive, domestically it may benefit once the Hong Kong market recovers. This trade reduced our relative underweight in Hong Kong and turned us into a relative overweight in financials from an underweight in August. Financials remains our biggest sector position in absolute terms.

Countries

Total
Countries
14
Largest Country China 41.08% Was (31-Aug-2019) 41.89%
Other View complete Country Diversification

Monthly Data as of 30-Sep-2019

Indicative Benchmark: MSCI All Country Asia ex Japan Index (unhedged)

Top Contributor^

China
Net Contribution 1.18%
Country
-0.02%
Selection 1.20%

Top Detractor^

United Kingdom
Net Contribution -0.19%
Country
-0.19%
Selection
0.00%

^Relative

Quarterly Data as of 30-Sep-2019

Largest Overweight

China
By3.38%
Fund 41.08%
Indicative Benchmark 37.70%

Largest Underweight

South Korea
By-3.44%
Fund 10.88%
Indicative Benchmark 14.32%

Monthly Data as of 30-Sep-2019

30-Sep-2019 - Anh Lu, Portfolio Manager,
In China, our largest country position in absolute terms, we exited Ctrip.com, China’s largest online travel company, amid tougher competition, macroeconomic weakness, and the impact of the Hong Kong unrest and renminbi depreciation on outbound travel growth. We sold Ctrip.com prior to Chinese internet search engine Baidu’s announcement of the sale of nearly a third of its stake in Ctrip, which drove shares lower. We also exited Uni-President China, a juice drink producer and instant noodles supplier, on valuation grounds. First-half profits improved but revenue growth has continued to disappoint. We see limited upside to this stock without better revenue growth.

Team (As of 31-Aug-2019)

Anh Lu

Anh Lu is a portfolio manager in the Equity Division of T. Rowe Price Hong Kong Limited. Ms. Lu is the lead portfolio manager for the Asia ex-Japan Equity Strategy. She is a vice president of T. Rowe Price Group, Inc. and T. Rowe Price Hong Kong Limited.

Ms. Lu has 24 years of investment experience, 18 of which have been with T. Rowe Price. Prior to joining the firm, she was a vice president of the Asia Pacific Technology Investment Banking Division of Salomon Smith Barney in Hong Kong. Before Salomon Smith Barney, Ms. Lu spent three years at LGT Asset Management as an analyst and portfolio manager.

Ms. Lu earned a B.A. with honours from the University of Western Ontario.

  • Fund manager
    since
    2009
  • Years at
    T. Rowe Price
    18
  • Years investment
    experience
    24
Nick Beecroft

Nicholas Beecroft is a portfolio specialist in the Equity Division at T. Rowe Price, representing the firm's global equity strategies. He is a vice president of T. Rowe Price Group, Inc. and T. Rowe Price International Ltd.

Mr. Beecroft has 18 years of investment experience, 14 of which have been with T. Rowe Price. He joined the firm in London in 2005 and spent many years working with our emerging markets equity team. Mr. Beecroft has been based in Hong Kong since 2011. Prior to joining T. Rowe Price, he was an investment analyst at Mercer Investment Consulting.

Mr. Beecroft earned a B.A, with honours, in contemporary European studies from the University of Southampton. He also has earned the Chartered Financial Analyst designation.

  • Years at
    T. Rowe Price
    14
  • Years investment
    experience
    18
Kanwal Masood

Kanwal Masood is a portfolio specialist in the Equity Division at T. Rowe Price, covering the Middle East and Africa Equity and Emerging Europe Equity Strategies. She is an associate vice president of T. Rowe Price International Ltd.

Ms. Masood has 10 years of investment experience, all of which have been with T. Rowe Price. She joined the firm in 2007, covering the global and regional emerging market equity strategies as a portfolio analyst. Prior to joining T. Rowe Price, she was a product specialist at the London Stock Exchange.

Ms. Masood earned a B.Sc. with honours in mathematics and computer science from King's College London.

  • Years at
    T. Rowe Price
    12
  • Years investment
    experience
    12

Fee Schedule

Share Class Minimum Initial Investment and Holding Amount Minimum Subsequent Investment Minimum Redemption Amount Sales Charge (up to) Investment Management Fee (up to) Ongoing Charges
Class A $15,000 $100 $100 5.00% 160 basis points 2.04%
Class I $2,500,000 $100,000 $0 0.00% 75 basis points 1.09%
Class Q $15,000 $100 $100 0.00% 75 basis points 1.17%

Please note that the Ongoing Charges figure is inclusive of the Investment Management Fee and is charged per annum.

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GIPS® Information

T. Rowe Price ("TRP") claims compliance with the Global Investment Performance Standards (GIPS®). TRP has been independently verified for the twenty one- year period ended June 30, 2017 by KPMG LLP. The verification report is available upon request. Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS standards on a firm-wide basis and (2) the firm's policies and procedures are designed to calculate and present performance in compliance with the GIPS standards. Verification does not ensure the accuracy of any specific composite presentation.

TRP is a U.S. investment management firm with various investment advisers registered with the U.S. Securities and Exchange Commission, the U.K. Financial Conduct Authority, and other regulatory bodies in various countries and holds itself out as such to potential clients for GIPS purposes. TRP further defines itself under GIPS as a discretionary investment manager providing services primarily to institutional clients with regard to various mandates, which include U.S, international, and global strategies but excluding the services of the Private Asset Management group.

A complete list and description of all of the Firm's composites and/or a presentation that adheres to the GIPS® standards are available upon request. Additional information regarding the firm's policies and procedures for calculating and reporting performance results is available upon request

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