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SICAV

Asian Opportunities Equity Fund

A concentrated portfolio of high-quality Asian companies.

ISIN LU1044871900 WKN A114WL

3YR Return Annualised
(View Total Returns)

Total Assets
(USD)

12.80%
$122.5m

1YR Return
(View Total Returns)

Manager Tenure

11.60%
5yrs

Information Ratio
(5 Years)

Tracking Error
(5 Years)

0.79
4.34%

Inception Date 21-May-2014

Performance figures calculated in USD

Other Literature

31-Dec-2019 - Eric C. Moffett, Portfolio Manager,
We remain constructive about the long-term prospects for Asia ex-Japan equities. We are seeing the start of upward earnings revisions and valuations in the region appear reasonable relative to long-term history and developed markets. We think the setup in China is turning favourable as the interim trade deal should stop relations with the U.S. getting worse and we are seeing consumer and business sentiment ticking up.
Eric C. Moffett
Eric C. Moffett, Portfolio Manager

Eric Moffett is a vice president of T. Rowe Price Group, Inc. and T. Rowe Price Hong Kong Limited. He is the portfolio manager for the firm's Asia Opportunities equity strategy and chairman of the strategy's Investment Advisory Committee. 

Click for Manager Outlook
 

Strategy

Manager's Outlook

We remain constructive on the long-term outlook for Asia ex-Japan equities, backed by the broad stability in the region's economies and policy support from several major central banks. Valuations in Asia ex-Japan appear broadly reasonable relative to long-term history and developed markets.

We believe the worst of the earnings downgrades could be over as we are seeing the start of upward earnings revisions, particularly in the technology sector. In the near term, however, upward revisions of earnings expectations could be muted, particularly in the absence of a comprehensive resolution to the trade discord between the U.S. and China.

We believe that Asia ex-Japan equity markets continue to offer opportunities to investors looking for top-quality companies. However, it will require careful navigation given the uncertainty brought about by the trade relations between the U.S. and China. We think that the full resolution of the material trade issues may take years.

Most of the stocks we own are supported by domestic demand and hence the direct impact of the China-U.S. trade uncertainty may be limited as far as the strategy is concerned. We continue to like high cash flow generative businesses that tend to be consumer focused. We are keeping a close eye on developments concerning the U.S.-China trade relations and remain watchful of company earnings following any imposition of tariffs.

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.

Investment Approach

  • Seeking long term capital appreciation to come from owning high quality businesses that will reliably compound earnings/ cash flow generation over time.
  • In Asia, this type of company tends to exhibit three key characteristics:
    • Established companies with leading market positions.
    • Good management teams who care about shareholder returns.
    • Returns-focused capital allocation and prudent balance sheet management.
  • Fundamental research is critical in helping us to identify these characteristics and exploit market inefficiencies:
    • Focus on the long term. Be patient.
    • Gain a better understanding of the durability of a company’s prospects than the market.
    • More accurately assess a company’s intrinsic value than other market participants.

Portfolio Construction

  • Typically 40-70 stock portfolio
  • Individual positions typically range from 0.50% to 6.00%.
  • Country and sector weightings a residual of stock selection.
  • Cash position typically less than 5%.

Performance (Class I)

Annualised Performance

  1 YR 3 YR
Annualised
5 YR
Annualised
Since Inception
Annualised
Since Manager Inception
Annualised
Fund % 11.60% 12.80% 8.51% 8.90% 8.90%
Indicative Benchmark % 5.22% 8.86% 5.06% 5.15% 5.15%
Excess Return % 6.38% 3.94% 3.45% 3.75% 3.75%

Inception Date 21-May-2014

Manager Inception Date 21-May-2014

Indicative Benchmark: MSCI All Country Asia ex Japan Index Net

Data as of  31-Jan-2020

  1 YR 3 YR
Annualised
5 YR
Annualised
Since Inception
Annualised
Fund % 24.89% 17.19% 10.36% 9.98%
Indicative Benchmark % 18.17% 12.77% 6.55% 6.09%
Excess Return % 6.72% 4.42% 3.81% 3.89%

Inception Date 21-May-2014

Indicative Benchmark: MSCI All Country Asia ex Japan Index Net

Data as of  31-Dec-2019

Performance figures calculated in USD

Recent Performance

  Month to DateData as of 14-Feb-2020 Quarter to DateData as of 14-Feb-2020 Year to DateData as of 14-Feb-2020 1 MonthData as of 31-Jan-2020 3 MonthsData as of 31-Jan-2020
Fund % 5.47% 0.53% 0.53% -4.69% 2.26%
Indicative Benchmark % 5.02% 0.35% 0.35% -4.45% 2.16%
Excess Return % 0.45% 0.18% 0.18% -0.24% 0.10%

Inception Date 21-May-2014

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. 

31-Dec-2019 - Eric C. Moffett, Portfolio Manager,
Asia ex-Japan equity markets advanced in December, propelled by progress in U.S.-China trade negotiations. Better economic data suggesting that the global slowdown may be nearing its bottom also helped. Within the portfolio, our allocation was responsible for underperformance at both country and sector levels. Our overweight position in in the lagging Philippine market hurt, as did stock selection in Hong Kong. For example, stocks seen as yield proxies like HKT Trust were sold down on the view that interest rate cuts may be near their end. Owning retailer Dairy Farm also worked against us amid concerns about the impact of the Hong Kong anti-government protests on its business. At the sector level, our stock choices in consumer staples and our overweight position in the sector which lagged in December curbed returns. Aside from Dairy Farm, owning Philippine Seven, a leading convenience store operator, weakened performance as the share price paused following year-to-date gains. However, we continue to like these cash-generative businesses. In contrast, our stock selection in South Korea, such as Samsung Electronics, worked well for the portfolio due to optimism surrounding the recovery of the memory chip market.

Holdings

Total
Holdings
50
Largest Holding Tencent Holdings 7.55% Was (30-Sep-2019) 6.23%
Other View Full Holdings Quarterly data as of 31-Dec-2019
Top 10 Holdings 43.14% View Top 10 Holdings Monthly data as of 31-Jan-2020

Largest Top Contributor^

Tencent Holdings
By 0.19%
% of fund 7.50%

Largest Top Detractor^

HKT Trust & HKT Limited
By -0.40%
% of fund 2.29%

^Absolute

Quarterly Data as of 31-Dec-2019

Top Purchase

Hysan Development (N)
4.00%
Was (30-Sep-2019) 0.00%

Top Sale

NAVER
0.92%
Was (30-Sep-2019) 2.56%

Quarterly Data as of 31-Dec-2019

31-Dec-2019 - Eric C. Moffett, Portfolio Manager,

We believe our portfolio is well positioned for an environment where the U.S. and China fail to arrive at a comprehensive and conclusive trade agreement in the near term and where global growth remains slow. During the quarter, we continued to invest in steady earnings compounders - companies that can deliver consistent earnings regardless of the economic cycle. Our preference for high-quality companies that are gaining market share globally and are not solely dependent on trade with the U.S. remained. We continue to prefer businesses, which are run by reliable managements teams, and are cash-generative with attractive dividend yield.

From a country perspective, we ended the quarter with a modest overweight in China, relative to the benchmark, purely driven by the opportunities we identified in the market based on our bottom-up stock selection. China remained the largest country position in absolute terms. We scaled back our India allocation, eliminating positions with expensive valuations.

From a sector perspective, we increased our allocation to consumer discretionary and turned overweight to real estate while reducing our overweight to communication services. We moved more underweight to financials.

We Reduced Our Allocation to India; Moved More Underweight Financials

In India, the economy remains under pressure and we see no recovery in the near term. In particular, we see no signs of a revival in the capital expenditure cycle. During the quarter, concerns over a deepening economic downturn, amplified by the ongoing credit squeeze at nonbank financial companies, capped gains in India's equity market. As at the end of December, we substantially reduced our relative overweight to India.

Amid concerns over a potential bubble in consumer stocks, we reduced our stake in certain consumer staples such as Colgate-Palmolive (India) due to expensive valuations following year-to-date gains. We also trimmed our exposure to Asian Paints following double-digit price gains in the year-to-date.

We exited Axis Bank, a private bank, as it had reached fair value and�the company's�group executive and chief financial officer resigned in December. However, we increased our exposure in other quality Indian financial names such as KMB, which continues to gain market share from state-owned banks, and Shriram Transport, a well-run non-bank financial company. We continue to add to our position in Voltas, which we discussed earlier. The elimination of Axis Bank from the portfolio increased our overall underweight to financials during the quarter.

We Turned Overweight Hong Kong and Real Estate

We found opportunities in Hong Kong as valuations corrected aggressively following the political turmoil. For example, we started investing in Hysan Development, a Hong Kong commercial landlord, which has a strong financial position and is focused on ensuring a ensuring a stable dividend. We bought the stock at depressed valuations. The position in Hysan contributed to the overweight allocation to the real estate sector during the quarter. We also increased our holdings in Shimao Property, which further enhanced our allocation to the sector.

Outside of real estate, we added to our holdings in defensive names such as Hong Kong Exchange, the largest vertically integrated exchange in the region, and HKT Trust. We added to our existing positions in Dairy Farm and Galaxy Entertainment, a Macau casino operator. However, we cut our exposure to AIA, a life insurer with a unique footprint in the region, amid the impact of protests on the cross-border business and intensified competition. However, we welcome the appointment of the new chief executive officer at AIA, an experienced hand who was from a rival insurer Ping An.

Relative Overweight to China Pared; Communication Services Allocation Trimmed

In China, we continue to carefully calibrate our exposure having no explicit position as to the outcome of the U.S.-China trade conflict. We believe that the portfolio offers protection in an environment where frayed trade relations between the U.S. and China could persist as a comprehensive agreement may be unlikely in the near term although we had not ruled out the possibility of an interim deal. As of the end of December, we scaled back our relative overweight to China.

We closed our position in China Mobile, the dominant mobile service provider in China, and the previously discussed China Unicom during the quarter. We viewed China Mobile as a bond proxy. However, it reported weak earnings and visibility on its earnings is low for the foreseeable future. We think China Mobile is seen as a "national service" telecommunications provider and is subject to regulatory pressure if it gets too big. Hence, market share loss and industry competition are the headwinds for the stock. As a result of selling these telco stocks, we reduced our relative overweight to communication services at the end of the quarter.

We also sold our position in Country Garden Services due to concerns about the charges it imposes on their parent for services rendered. We were also worried that sales of its parent property developer have peaked, which may hit its property services unit. We continue to like the consolidating property management services market but prefer to own stocks with cheaper valuations within the space, such as Greentown Service.

Within real estate, we trimmed our China Vanke position due to its demanding valuation and slowing contract sales. While China Vanke remains a quality stock, Shimao's contract sales are growing at a faster pace.

During the quarter, we continued to enhance our holdings in existing high-conviction ideas in China. For example, we added to our position in Alibaba ADRs in anticipation of gains ahead of its Hong Kong debut. We also increased our stake in Tencent Holdings, China's dominant social media platform, and raised our position in fast-food chain operator Yum China.

New Auto Components Positions Bolstered Consumer Discretionary Overweight

From a sector perspective, we increased our allocation to consumer discretionary, our biggest sector position in absolute and relative terms. We view the current weakness in the Chinese auto market as an opportune time to invest in auto component names that are likely to benefit from market share gains and the potential recovery of the auto market.

For example, we established a position in Minth, one of the leading suppliers of non-core auto body parts in China. We think its market share gains in overseas market will bolster revenues in five years. Moreover, it will benefit from content growth opportunity given its expansion into new product categories. We like its improving free cash flow and returns and strong growth visibility.

We initiated a position in Fuyao Glass Industry, a high-quality automotive glass maker, which we believe is underearning due to the cyclical weakness of China's auto market. However, we think its margins may recover along with the market and the improving profitability of its overseas operations.

Sectors

Total
Sectors
10
Largest Sector Consumer Discretionary 22.42% Was (31-Dec-2019) 22.15%
Other View complete Sector Diversification

Monthly Data as of 31-Jan-2020

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

Top Contributor^

Industrials & Business Services
Net Contribution 0.41%
Sector
-0.06%
Selection 0.47%

Top Detractor^

Consumer Staples
Net Contribution -0.44%
Sector
-0.30%
Selection
-0.14%

^Relative

Quarterly Data as of 31-Dec-2019

Largest Overweight

Consumer Discretionary
By7.50%
Fund 22.42%
Indicative Benchmark 14.93%

Largest Underweight

Information Technology
By-10.01%
Fund 8.87%
Indicative Benchmark 18.88%

Monthly Data as of 31-Jan-2020

31-Dec-2019 - Eric C. Moffett, Portfolio Manager,
We increased our overweight position in consumer discretionary after investing in two Chinese auto component makers with favourable market share and profitability prospects. One is a non-core auto body parts supplier, which we think will benefit from share gains in overseas markets and expansion into new product categories. We like its improving free cash flow and strong growth visibility. The other is an automotive glass maker whose margins may recover along with the market and improving profitability of its overseas operations. Elsewhere, we increased our underweight in financials as we exited India’s Axis Bank after it reached fair value.

Countries

Total
Countries
9
Largest Country China 39.13% Was (31-Dec-2019) 42.19%
Other View complete Country Diversification

Monthly Data as of 31-Jan-2020

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

Top Contributor^

China
Net Contribution 0.66%
Country
0.05%
Selection 0.62%

Top Detractor^

Hong Kong
Net Contribution -0.40%
Country
0.04%
Selection
-0.44%

^Relative

Quarterly Data as of 31-Dec-2019

Largest Overweight

Hong Kong
By4.55%
Fund 14.24%
Indicative Benchmark 9.69%

Largest Underweight

South Korea
By-6.60%
Fund 7.05%
Indicative Benchmark 13.65%

Monthly Data as of 31-Jan-2020

31-Dec-2019 - Eric C. Moffett, Portfolio Manager,
We reduced our relative overweight exposure to China as we sold our position in Country Garden Services due to concerns about the charges it imposes on its parent for services rendered. We preferred other property management stocks with cheaper valuations. We closed our positions in China Mobile and China Unicom. China Mobile reported weak results and visibility on future earnings is low. It is seen as a “national service” telecommunications provider and may be subject to regulatory pressure. Unicom, which we bought on improving returns, reported a mixed set of results that indicated a slower-than-expected pace of recovery.

Team (As of 06-Feb-2020)

Eric C. Moffett

Eric Moffett is a vice president of T. Rowe Price Group, Inc. and T. Rowe Price Hong Kong Limited. He is the portfolio manager for the firm's Asia Opportunities equity strategy and chairman of the strategy's Investment Advisory Committee. 

Mr. Moffett has 19 years of investment experience, 12 of which have been with T. Rowe Price. Prior to joining the firm in 2007, Mr. Moffett was an analyst with Fayez Sarofim & Company, where he covered the household products, communications equipment and lodging/leisure industries. Mr. Moffett also was employed as an associate at Audax Group and as a management consultant with Bain & Company.

Mr. Moffett earned an A.B., magna cum laude, in economics from Princeton University and an M.B.A. from Harvard Business School.

  • Fund manager
    since
    2014
  • Years at
    T. Rowe Price
    12
  • Years investment
    experience
    19
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
    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 $15,000 $100 $100 5.00% 160 basis points 2.07%
Class I $2,500,000 $100,000 $0 0.00% 75 basis points 1.10%
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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