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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.

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SICAV

Asian ex-Japan Equity Fund

A diversified fund, with a focus on sustainable growth.

ISIN LU1382643945 WKN A2AGKU

3YR Return Annualised
(View Total Returns)

Total Assets
(USD)

7.20%
$788.3m

1YR Return
(View Total Returns)

Manager Tenure

13.56%
4yrs

Information Ratio
(3 Years)

Tracking Error
(3 Years)

0.80
3.67%

Inception Date 16-Mar-2016

Performance figures calculated in EUR

Other Literature

31-Oct-2020 - Anh Lu, Portfolio Manager,
We remain constructive about the outlook for Asia ex-Japan equities. We believe that the economic recovery from the pandemic may turn out to be a gradual process as the reopening in some countries may be slower. China’s recovery will likely continue to broaden and gain momentum. Regardless of the results of the U.S. elections, a challenging U.S.-China relationship is likely to continue with tensions remaining across a range of economic and political issues.
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.

Click for Manager Outlook
 

Strategy

Manager's Outlook

We remain constructive about the outlook for Asia ex-Japan equities as we believe that our long-term investment focus will help us weather the near-term disruption brought about by the coronavirus pandemic and the growing friction between the U.S. and China. Valuations in most regional markets are still reasonable, although some pockets may look expensive due to speculative buying by retail investors.

We believe economic recovery from the coronavirus pandemic may turn out to be a gradual process, with demand remaining muted for some time. In some countries, reopening may be tentative and slower depending on their resources and the time it takes for their trading and business counterparts to also recover. However, the monetary and fiscal measures deployed by various governments in Asia to stem the impact of the outbreak are encouraging and will continue to be supportive.

We think that even if the global economy does not recover strongly from the coronavirus outbreak, our bottom-up investing approach can help us to find attractive growth opportunities - companies that are best positioned to manage through the crisis and emerge in stronger shape. In our view, it helps that Asia offers a deep and dynamic investment opportunity set.

We think the recovery in China, the first major economy to return to growth following the damage wrought by the coronavirus, will continue to gain momentum. China appears to have seen the worst of the coronavirus outbreak as it takes an aggressive approach on containing fresh cases.� For the rest of Asia, the reopening of economies will continue to be gradual and will largely depend on whether the country has a grip on their coronavirus case numbers.

While we recognize that the current environment presents a challenge to earnings forecasts, we may see healthier earnings growth in 2021 and beyond. We expect downward earnings revisions will be most severe this year and that the timing and pace of recovery will vary across industries.

We recognize two key risks. First, a fresh wave of the coronavirus in certain places could trigger the return of harsh social distancing measures, in turn further hurting businesses and economies. Secondly, the tensions between the U.S. and China will likely persist, with both countries focusing on technology, national security, and economic protectionism.

We continue to leverage the fundamental research produced by our Asia-based research team; whose insights provide a competitive edge in helping us identify companies that we expect to emerge in stronger shape from the crisis once economic recovery takes hold.

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 | EUR)

Annualised Performance

  1 YR 3 YR
Annualised
5 YR
Annualised
Since Inception
Annualised
Fund % 13.56% 7.20% N/A 12.15%
Indicative Benchmark % 10.96% 4.26% N/A 10.64%
Excess Return % 2.60% 2.94% N/A 1.51%

Inception Date 16-Mar-2016

Indicative Benchmark: MSCI All Country Asia ex Japan Index Net

Data as of  31-Oct-2020

Performance figures calculated in EUR

  1 YR 3 YR
Annualised
5 YR
Annualised
Since Inception
Annualised
Fund % 14.11% 8.99% N/A 12.01%
Indicative Benchmark % 9.55% 5.19% N/A 10.01%
Excess Return % 4.56% 3.80% N/A 2.00%

Inception Date 16-Mar-2016

Indicative Benchmark: MSCI All Country Asia ex Japan Index Net

Data as of  30-Sep-2020

Performance figures calculated in EUR

Recent Performance

  Month to DateData as of 30-Nov-2020 Quarter to DateData as of 30-Nov-2020 Year to DateData as of 30-Nov-2020 1 MonthData as of 31-Oct-2020 3 MonthsData as of 31-Oct-2020
Fund % 5.35% 6.99% 12.50% 1.55% 4.49%
Indicative Benchmark % 5.20% 8.87% 9.85% 3.48% 6.43%
Excess Return % 0.15% -1.88% 2.65% -1.93% -1.94%

Inception Date 16-Mar-2016

Indicative Benchmark: MSCI All Country Asia ex Japan Index Net

Indicative Benchmark: MSCI All Country Asia ex Japan Index Net

Performance figures calculated in EUR

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.

Index 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. 

31-Oct-2020 - Anh Lu, Portfolio Manager,
Asia ex-Japan equities advanced in October, prompted by the slowing pace of coronavirus cases in the region and optimism over China’s economic recovery after it regained the growth it had lost in the first half. Within the portfolio, stock selection in China drove the fund’s underperformance. Our underweight in Meituan Dianping, an ecommerce platform providing services such as food delivery, hurt returns as its shares rallied along with other ecommerce stocks. We prefer Alibaba, where we have an overweight, given its solid growth and strong cash flow generation as well as its fast-growing cloud business. Owning TAL Education curbed returns as the Chinese tutoring company reported weaker-than-expected results. We believe the market underappreciates TAL’s track record of 17 years which should help strengthen its online leadership. In contrast, stock selection in India, such as Kotak Mahindra Bank (KMB) helped performance due to earnings upgrades and possible inclusion in the MSCI Global Indices. Given the high quality of its franchise, we think KMB will be one of the few Indian banks that will take market share over the next few years. Stock choices in financials boosted relative returns. Aside from KMB, HDFC Bank also aided performance following its strong quarterly results.

Holdings

Total
Holdings
74
Largest Holding Tencent Holdings 8.22% Was (30-Jun-2020) 8.86%
Other View Full Holdings Quarterly data as of 30-Sep-2020
Top 10 Holdings 49.22% View Top 10 Holdings Monthly data as of 31-Oct-2020

Largest Top Contributor^

Alibaba Group Holding
By 1.87%
% of fund 9.99%

Largest Top Detractor^

Kotak Mahindra Bank
By -0.85%
% of fund 2.33%

^Absolute

Quarterly Data as of 30-Sep-2020

Top Purchase

NARI Technology (N)
1.48%
Was (30-Jun-2020) 0%

Top Sale

Shenzhen Inovance Technology
0.74%
Was (30-Jun-2020) 1.59%

Quarterly Data as of 30-Sep-2020

30-Sep-2020 - Anh Lu, Portfolio Manager,

For most of the year, we have steered the portfolio towards high-quality growth names that we think will emerge from the coronavirus crises in a stronger position. These tend to be companies that are leaders in their industry, and which continue to gain share in their sectors under adverse market conditions. We pursued positions in better-quality companies that we found expensive prior to the coronavirus outbreak. We also looked at companies that have a strong capital structure that can allow them to weather a potentially prolonged downturn in business activity.

During the quarter, we sought opportunities among "growth cyclicals." We pursued these businesses with secular growth opportunities but have been impeded by a cyclical downturn due to the coronavirus pandemic. In the quarter, the market favored high-growth names with less proven businesses, but we shifted the portfolio away from those and favored these "growth cyclicals."�

Domestic consumption remains an overarching theme in our portfolio. We believe that Asian households are generally under levered and consumption is a secular opportunity. Across the region, we also favor beneficiaries of import substitution as domestic companies come up with ways to replace imports with local products, especially amid heightened geopolitical tensions.

In China, we look for companies that will benefit from the increasing demand for premium products while across countries there may be opportunities in businesses that will benefit from consolidation in fragmented industries. When we think about our bottom-up stock picks, we also look at the extent of a company's innovation, not merely in the use of technology, but in other ways it seeks to improve market positioning.

We Reduced Allocation in China but Moved into Higher Conviction Names

In China, our largest allocation at period-end, we exited several names where our investment thesis had panned out and was reflected in their stock prices. That gave us room to shift to investment opportunities which are well-managed and show a re-acceleration of growth. We also pursued names that we think are likely to gain market share and those with undiscounted changes or catalysts.�

  • Within China's property sector, for example, we eliminated Shimao Group, a nationwide homebuilder with a focus on Tier 1 and 2 cities, as our thesis of growth acceleration backed by market share gains in a consolidating market has played out. While we remain confident of Shimao's growth, we think rival China Resources Land (CR Land), which is also a shopping mall operator, may benefit more in an environment where volume growth is reaching a peak, and investor attention may focus more on companies with grade A investment portfolios. We think that CR Land, which is part of the well-run state-owned enterprise CR Group, has some of the best retail assets in China. Moreover, it has a disciplined balance sheet with low gearing and funding cost.� In a declining margin or return environment, companies with low funding cost will be more competitive and profitable. A low gearing balance sheet also means CR Land can accelerate growth if needed. Within the CR Group, there could also be some future catalysts such as the spinoff of its property management arm.
  • Within the consumer discretionary sector in China, we consolidated the travel-related names that we owned, focusing more on domestic travel. Hence, we eliminated our position in Trip.com, China's dominant online Chinese travel agency, taking advantage of its share price recovery after a sharp fall in the first quarter. While its second-quarter results were better than expected, outbound travel remains at a minimal level. Our base case is for domestic travel to fully recover next year and international travel the year after. While we exited Trip.com, we initiated a position in Huazhu Group, where we have higher conviction as we view it as one of the most efficient and leading hotel operators in China that can potentially lead the consolidation of non-branded hotels.
  • Still within consumer discretionary, we sold out of Pinduoduo, an ecommerce firm where Tencent holds a stake, locking in gains.
  • We eliminated our position in Songcheng Performance, one of the better-managed, show-based theme park operators in China, which we viewed as a beneficiary of domestic travel and leisure growth. The stock rallied on news of China allowing group tours and cross province travel. However, we think that the stock has discounted the expected acceleration in earnings growth ahead of new park openings in 2021 and 2022.
  • Among household durables, we exited Haier Electronics as the privatization thesis has played out, with controlling shareholder Haier Smart Home taking its household appliance maker unit private.� Instead, we added to our position in Gree Electric Appliance, China's largest air conditioner manufacturer, which declared an interim dividend, positive news on corporate governance, and has completed its channel destocking. We started a position in Gree last year amid its improving shareholding structure. Its state-owned parent sold part of its stake in the company to an investment fund. This state-owned enterprise reform plan will likely result in improved corporate governance, better channel efficiency, a potential rerating and further market consolidation.
  • Outside of China's consumer discretionary sector, we eliminated PICC Property & Casualty, one of the country's largest property and casualty insurance companies, as the departure of its well-respected chairman and risk management issues cast a pall on our thesis of an improving return on equity. Aside from these, continued concerns on auto reform deregulation and elevated combined operating ratio from floods dragged down its share price. We decided to redeploy funds to higher conviction ideas such as life insurer AIA, which has an inimitable footprint in southeast Asia and a growing China business.

We Boosted Positions in Taiwanese Semiconductor and Retail Names

We bought more shares of Taiwanese semiconductor names amid the prospect of their continued earnings growth. We added to our stake in MediaTek, a fabless design house which in our view remains a key 5G solution provider for Chinese smartphone makers even as the U.S. expanded its curbs on Huawei Technologies. MediaTek is the only non-US independent 5G solution supplier globally.

Outside of IT, we bought more shares in President Chain Store, a franchisee for the 7-Eleven convenience stores in Taiwan, as valuations are more palatable following a stock price correction. Moreover, we started to feel more comfortable about the macro environment in Taiwan and while the coronavirus pandemic has severely affected its Philippine business, we think the Philippines remains an attractive market for convenience store operators over the medium to long term. At the end of the quarter, these changes led to a reduced underweight allocation in Taiwan.

We Invested in Lagging Names with Growth Prospects in the Utilities Sector

We invested in two new companies within the utilities sector with good growth prospects, taking advantage of their share price weakness. This significantly reduced our underweight allocation in this sector. We established a position in China Resources Gas, a gas distribution company. In China, we view gas distribution as an attractive sector with multiple tailwinds. We like the sector as it enjoys government policy support, volume growth, continuing gas consumption growth compared to other energy sources, and potential merger and acquisition opportunities. We also initiated a position in Guangdong Investments, a well-run water distribution and sewage treatment company, following sharp share price weakness due to concerns about the impact of the coronavirus pandemic on the earnings of its non-water division. We think the company, which provides natural water to Hong Kong, is committed to maintaining its dividend per share growth as the impact of the pandemic on its business is likely to be temporary.

Within Industrials, We Added an Electrical Equipment Maker Poised for Further Growth

Within the industrials sector, we own companies that are gaining market share and expanding margins such as the abovementioned Shenzhen Inovance. During the quarter, we initiated a position in NARI Technology, which makes electrical equipment and counts China's major state-owned grid companies as key customers. It has a leading position in secondary power grid equipment. We view NARI as a good quality company which will benefit from the digitalization of China's power grid. The company should see a re-acceleration of growth from next year due to the higher power grid upgrades. In the near term, its revenue is expected to grow faster in the second half of 2020 as orders in grid automation and information and communications increase. It has a cash generative and recurring business and we believe its position is well entrenched as many of its equipment items are vital and related to safety.

Sectors

Total
Sectors
10
Largest Sector Information Technology 22.78% Was (30-Sep-2020) 22.41%
Other View complete Sector Diversification

Monthly Data as of 31-Oct-2020

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

Top Contributor^

Industrials & Business Services
Net Contribution 0.82%
Sector
-0.05%
Selection 0.87%

Top Detractor^

Consumer Staples
Net Contribution -0.81%
Sector
-0.31%
Selection
-0.51%

^Relative

Quarterly Data as of 30-Sep-2020

Largest Overweight

Consumer Staples
By4.38%
Fund 9.32%
Indicative Benchmark 4.94%

Largest Underweight

Materials
By-3.79%
Fund 0.00%
Indicative Benchmark 3.79%

Monthly Data as of 31-Oct-2020

31-Oct-2020 - Anh Lu, Portfolio Manager,
We turned more overweight information technology (IT), our biggest sector position in absolute terms, by investing in a large China data-centre operator. We view the company as well placed to capture secular data-centre demand in China given its quality execution and strong, stable management team that is return-focused. Within the consumer discretionary sector, we exited Chinese hotel operator BTG Hotels for a more attractive investment opportunity. We instead bought shares of a global retailer of lifestyle products at its initial public offering. Its low cost with reasonable quality strategy has been well received by mass consumers.

Countries

Total
Countries
11
Largest Country China 46.39% Was (30-Sep-2020) 45.85%
Other View complete Country Diversification

Monthly Data as of 31-Oct-2020

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

Top Contributor^

Taiwan
Net Contribution 0.29%
Country
-0.14%
Selection 0.42%

Top Detractor^

India
Net Contribution -0.43%
Country
0.09%
Selection
-0.52%

^Relative

Quarterly Data as of 30-Sep-2020

Largest Overweight

India
By2.95%
Fund 11.96%
Indicative Benchmark 9.01%

Largest Underweight

South Korea
By-4.18%
Fund 8.98%
Indicative Benchmark 13.16%

Monthly Data as of 31-Oct-2020

31-Oct-2020 - Anh Lu, Portfolio Manager,
We increased our allocation in the Philippines as we invested in a fixed broadband company that we think will continue to benefit from strong demand for connectivity as the pandemic accelerates the work-from-home trend. The Philippines has one of the lowest broadband penetration rates in the region and the competitive landscape is favorable as the incumbent providers focus more on 5G rollout. This new addition to the portfolio is a market share gainer in an underpenetrated market.

Team (As of 01-Oct-2020)

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
    2016
  • Years at
    T. Rowe Price
    19
  • Years investment
    experience
    25
Nick Beecroft, CFA

Nick Beecroft is the APAC head of the Investment Specialist Group and a portfolio specialist in the Equity Division. He also is a vice president of T. Rowe Price Group, Inc., and T. Rowe Price International Ltd.

Nick’s investment experience began in 2001, and he has been with T. Rowe Price since 2005, beginning in the Equity Division. Prior to this, Nick was employed by Mercer Investment Consulting as an investment analyst.

Nick earned a B.A., with honors, in contemporary European studies from the University of Southampton. He also has earned the Chartered Financial Analyst® designation.

CFA® and Chartered Financial Analyst® are registered trademarks owned by CFA Institute.

  • Years at
    T. Rowe Price
    15
  • Years investment
    experience
    19

Fee Schedule

Share Class Minimum Initial Investment and Holding Amount (USD) Minimum Subsequent Investment (USD) Minimum Redemption Amount (USD) Sales Charge (up to) Investment Management Fee (up to) Ongoing Charges
Class A $1,000 $100 $100 5.00% 160 basis points 1.72%
Class I $2,500,000 $100,000 $0 0.00% 75 basis points 0.81%
Class Q $1,000 $100 $100 0.00% 75 basis points 0.87%

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