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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)

9.88%
$60.2m

1YR Return
(View Total Returns)

Manager Tenure

6.21%
5yrs

Information Ratio
(5 Years)

Tracking Error
(5 Years)

0.86
4.36%

Inception Date 21-May-2014

Performance figures calculated in USD

Other Literature

30-Sep-2019 - Eric C. Moffett, Portfolio Manager,
We believe we are well positioned for an environment where trade tensions between the U.S. and China will persist and that a comprehensive agreement may be unlikely. However, we are monitoring developments as we are not ruling out the possibility of an interim deal. We remain constructive about the long-term prospects of the Asia ex-Japan region, supported by robust domestic demand. However, finding top-quality companies that can compound growth will require careful research.
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. 

 

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.

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 % 6.21% 9.88% 7.99% 8.16% 8.16%
Indicative Benchmark % -3.44% 6.32% 4.23% 4.20% 4.20%
Excess Return % 9.65% 3.56% 3.76% 3.96% 3.96%

Inception Date 21-May-2014

Manager Inception Date 21-May-2014

Indicative Benchmark: MSCI All Country Asia ex Japan Index Net

Data as of  30-Sep-2019

  1 YR 3 YR
Annualised
5 YR
Annualised
Since Inception
Annualised
Fund % 6.21% 9.88% 7.99% 8.16%
Indicative Benchmark % -3.44% 6.32% 4.23% 4.20%
Excess Return % 9.65% 3.56% 3.76% 3.96%

Inception Date 21-May-2014

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 15-Oct-2019 Quarter to DateData as of 15-Oct-2019 Year to DateData as of 15-Oct-2019 1 MonthData as of 30-Sep-2019 3 MonthsData as of 30-Sep-2019
Fund % 1.77% 1.77% 13.47% 2.08% -0.39%
Indicative Benchmark % 2.06% 2.06% 7.90% 1.67% -4.50%
Excess Return % -0.29% -0.29% 5.57% 0.41% 4.11%

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. 

30-Sep-2019 - Eric C. Moffett, Portfolio Manager,
Asia ex-Japan equities rose in September on the resumption of the U.S. and China trade talks in October and the U.S. Federal Reserve’s rate cut. India outperformed after a surprise corporate tax rate reduction and our stock selection there, particularly Kotak Mahindra Bank (KMB) and Shriram Transport, worked well. We view KMB as a high-quality name in the retail lending space. We think Shriram is a well-run non-bank financial company and may benefit if the economy improves. In contrast, our stock choices in Hong Kong hurt due to concerns that months of anti-government protests may tip the economy into recession. Owning Hong Kong-listed Dairy Farm crimped returns but we continue to like the cash-generative nature of this pan-Asian retailer. From a sector level, our preferences in information technology boosted performance. Taiwan Semiconductor Manufacturing helped amid its more upbeat outlook due to the accelerating adoption of 5G technology in smartphones and infrastructure chips. Conversely, our stock selection in consumer staples hampered returns. Owning Yixintang Pharmaceutical hurt due to a new policy regulation in its key domestic market Yunnan. We believe that the worst is behind Yixintang and that it will benefit from China’s rising health care spending and sector consolidation.

Holdings

Total
Holdings
51
Largest Holding Alibaba Group Holding 6.25% Was (30-Jun-2019) 5.55%
Other View Full Holdings Quarterly data as of 30-Sep-2019
Top 10 Holdings 42.44% View Top 10 Holdings Monthly data as of 30-Sep-2019

Largest Top Contributor^

Taiwan Semiconductor Manufacturing
By 2.79%
% of fund 6.21%

Largest Top Detractor^

Tencent Holdings
By -3.35%
% of fund 6.20%

^Absolute

Quarterly Data as of 30-Sep-2019

Top Purchase

Taiwan Semiconductor Manufacturing
6.21%
Was (30-Jun-2019) 4.32%

Top Sale

HKT Trust & HKT Limited
2.49%
Was (30-Jun-2019) 5.24%

Quarterly Data as of 30-Sep-2019

30-Jun-2019 - Eric C. Moffett, Portfolio Manager,

China remained the largest country position at the end of the second quarter in absolute terms, but we substantially reduced the portfolio's overweight as a result of our bottom-up stock selection process. Heightened uncertainty and low visibility facing the region in light of the ongoing U.S-China trade dispute were further reasons for the move. Given the portfolio manager's preference for companies that are expected to benefit from income growth in China, the portfolio has a limited exposure to exporters or to trade-related names.

Taiwan remained the portfolio's largest relative underweight, followed by South Korea. The portfolio turned less underweight to both markets as it increased exposure to high-conviction holdings. In India, the portfolio manager reduced his overweight allocation.

From a sector perspective, the portfolio reduced the allocation to consumer staples, one of the largest relative overweights. Instead, it increased exposure to IT and financials, the two biggest underweights, all as a result of the bottom-up stock selection process. The portfolio turned significantly more overweight to communication services, the biggest above-benchmark sector position, which is yielding quality longer-term holdings.

China Overweight Reduced: More Focus on Share Gainers, Leaders in Consolidating Industries

In China, the focus was on consolidating the portfolio existing high-conviction ideas while building new and more attractive positions. We prefer companies that are gaining market share globally and are not solely dependent on trade with the U.S. We favor those companies with the potential to gain market share in fragmented industries due to their structural growth prospects.

We continue to stay positive about long-term growth in household income as a result of minimum wage increases. The portfolio manager is keen to find businesses in China (including the A-share market), with a commanding position in a consolidating sector. These companies will typically be less likely affected by macro issues and will likely grow steadily for many years.

Another major theme is in industrial technology, where domestic companies are taking market share from foreign rivals doing business in China. The quality of these companies should be comparable to foreign competition and given time, they are likely to grow outside of China. We believe in investing early in these Chinese firms, which may later transform themselves into globally competitive firms, and holding on to them for a long time. The portfolio also added to its position in Tencent and started investing in Tencent Music Entertainment, which is facing limited competition and increasing penetration.

Among China A-shares, the portfolio manager started investing in Yunnan Hongxiang Yixintang, a pharmacy chain, which is looking to become the leading player in Southwest China, home to about 200 million people. This regional player mostly focuses on dispensing medication, but it has the option to diversify into other consumer products, like beauty and health retailers, Boots and A.S. Watson. The portfolio manager views Yunnan Hongxiang as a low-beta compounder with a strategy that is aligned with government policy, which may benefit from China's pharmacy retail sector consolidation. The fragmented pharmacy retail sector offers exposure to China's rising health care spending with lower policy risks.

The portfolio also initiated a position in Shenzhen Inovance for the first time. We expect this company, a provider of inverters and controllers for industrial automation, electric vehicles, and elevators, to gain market share in its structurally growing area. It has a healthy balance sheet with a net cash position in the last decade.

During the quarter, the portfolio manager eliminated a number of A-shares with either company-specific issues, less compelling prospects, or following share price gains. The portfolio exited Sichuan Swellfun following the liquor maker's sharp gains in the first quarter. Increasing competition, and rising channel inventories were additional reasons for exiting the stock. We also closed the portfolio's position in Jiangsu Hengrui after the biopharmaceutical company's considerable first-quarter advance. Despite these sales and the uncertainty brought about by the trade conflict, the portfolio retains its long-term belief that the China A-share market remains a fertile ground for individual stock picking.

Taiwan and South Korean Underweight Trimmed

In Taiwan, the portfolio started investing in MediaTek, a fabless semiconductor company. MediaTek 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, which 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.

The portfolio enhanced its position in Taiwan Semiconductor Manufacturing (TSMC), one of the world's largest contract chipmakers. TSMC may have seen the trough of the cycle in the first quarter this year and inventories will likely normalize by midyear, in our view. We expect TSMC to keep taking market share as it wields pricing power amid industry consolidation. It will likely diversify to new product applications, increase dividend payout, and improve margin and return on equity over the next two years as its growth reaccelerates. We like TSMC's strong balance sheet, and we think it is well positioned to benefit from the trends of smart cars, artificial intelligence (AI), and 5G in the coming years.

In South Korea, we added to the portfolio's existing holdings in high-quality names with better prospects for recovery and growth. For example, this included increasing the portfolio's exposure to Samsung Electronics, one of the world's biggest memory chipmakers, which is poised to benefit from a recovery in the DRAM cycle. The stock may also gain from the U.S. restrictions on China-based technology company Huawei in terms of short-term handset sales. We believe 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 AI-related applications, cloud gaming, the 5G cycle, and new server platforms.

The portfolio manager also boosted the position in Naver, which owns South Korea's dominant search engine. We think its domestic business, which is of high quality and generates stable growth, is likely to improve further in 2019 due to its new user interface generating more revenue from e-commerce, combined with better cost control by the company.

Allocation Pared in Consumer Staples

We reduced the portfolio's allocation to consumer staples, while moving to an underweight position in consumer discretionary. Within the former, the portfolio exited ITC whose shares fell in the year to date. The Indian cigarette company reported volume recovery in its fiscal year 2019 but margins were lower. The increase in tax on cigarettes is an issue and India's newly appointed health minister is a doctor, who previously served in the earlier Modi government and was aggressive on tobacco regulations.

The decision to eliminate ITC contributed to the portfolio's reduced overweight allocation to India, which posed a challenge in the past given demanding valuations for lower growth that can be extracted elsewhere in the region. The liquidity crisis involving nonbank financial companies in late 2018 presented the portfolio a good opportunity to increase positions in select Indian financials stocks, such as Shriram Transport, Kotak Mahindra Bank, and Axis Bank.

Aside from exiting Sichuan Swellfun as earlier discussed, the portfolio sold out of convenience store operator Taiwan Familymart following year-to-date gains, but established a new position in Yunnan Hongxiang Yixintang, a previously mentioned.

Increased Communication Services, Biggest Sector Overweight

The portfolio increased its overweight in communication services by positions in the abovementioned Tencent and Tencent Music Entertainment. These core investments are quality long-term holdings, which are earnings compounders, strong cash generative businesses with low turnover. We view Tencent Music, which will likely increase its market penetration, as one of those long-term compounders that fit in the "core bucket" of ideas.

The portfolio raised its exposure to Hong Kong-listed HKT Trust. We continue to like its stable and defensive nature and believe that it will likely benefit from the mobile industry consolidation in Hong Kong in the longer term.

Sectors

Total
Sectors
10
Largest Sector Financials 20.62% Was (31-Aug-2019) 19.88%
Other View complete Sector Diversification

Monthly Data as of 30-Sep-2019

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

Top Contributor^

Industrials & Business Services
Net Contribution 1.48%
Sector
-0.06%
Selection 1.54%

Top Detractor^

Consumer Discretionary
Net Contribution -0.21%
Sector
-0.05%
Selection
-0.15%

^Relative

Quarterly Data as of 30-Sep-2019

Largest Overweight

Communication Services
By4.98%
Fund 17.00%
Indicative Benchmark 12.02%

Largest Underweight

Information Technology
By-5.14%
Fund 12.66%
Indicative Benchmark 17.80%

Monthly Data as of 30-Sep-2019

30-Sep-2019 - Eric C. Moffett, Portfolio Manager,
In financials, we reduced our relative underweight as we initiated a position in a Taiwanese leasing company. We like its high return-on-equity through the cycle, driven by its high quality and stable leasing franchise in Taiwan and its growing China business. In communication services, we decreased our relative overweight as we locked in some gains in a defensive telecommunications stock. However, we established a position in a Chinese telecommunication company, which will likely benefit from the launch of 5G services. We think it has limited potential downside. We invested in a Chinese search engine company due to its depressed valuation.

Countries

Total
Countries
9
Largest Country China 39.92% Was (31-Aug-2019) 36.53%
Other View complete Country Diversification

Monthly Data as of 30-Sep-2019

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

Top Contributor^

India
Net Contribution 1.76%
Country
0.04%
Selection 1.72%

Top Detractor^

Thailand
Net Contribution -0.13%
Country
0.02%
Selection
-0.15%

^Relative

Quarterly Data as of 30-Sep-2019

Largest Overweight

India
By4.73%
Fund 15.16%
Indicative Benchmark 10.43%

Largest Underweight

Taiwan
By-5.42%
Fund 8.10%
Indicative Benchmark 13.52%

Monthly Data as of 30-Sep-2019

30-Sep-2019 - Eric C. Moffett, Portfolio Manager,
In China, our biggest country position, we turned to a relative overweight in September from an underweight the previous month. Aside from new investments in a telecommunications firm and a search engine company, we started a position in one of the better-managed, show-based Chinese theme park operators with mass market appeal. It has a net cash business and we view it as a beneficiary of domestic travel and leisure growth. In Thailand, we reduced our relative underweight by building a position in a cement, petrochemical and paper producer, which is a big index weight with high yield.

Team (As of 31-Aug-2019)

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
    11
  • Years investment
    experience
    18
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

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 2.07%
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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