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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

31-Aug-2019 - Eric C. Moffett, Portfolio Manager,
We continue to find opportunities in high quality companies – those that are well-managed and that can withstand market downturns and gain market share – despite current adverse conditions brought about by the ongoing trade war between the U.S. and China. We are focussing more on high-conviction ideas, such as those with strong industry positions, firms that are steadily growing and those with pricing power that can compound earnings and are less likely to be affected by macroeconomic issues.
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

MANAGER'S OUTLOOK

Asia ex-Japan equity markets continue to offer a wealth of opportunities for investors looking for top-quality companies, those that can compound growth and are managed by solid management teams despite the uncertainty brought about by the frayed trade relations between the U.S. and China.

We are mindful that the trade tensions may stoke volatility for some time, but we remain constructive about the long-term prospects of the region, backed by robust domestic demand and income growth. In China, where consumption is the largest part of the economy, we expect consumer demand to be supported by continued growth in average household incomes as minimum wage increase due to the tight labor market. We believe that China will continue transitioning its economy carefully, balancing growth stabilization with deleveraging efforts while managing the impact of the trade tensions with the U.S.

In China, we seek to find leaders in industries that are undergoing consolidation as well as potential market share gains. We believe that China's A-shares are a large and inefficient market, which can provide compelling opportunities. In this market, we think we can find low-beta quality businesses facing structural growth but are yet untapped by foreign investors. We think China is potentially a rich source of high-quality companies that are going up the value chain and pushing the boundaries of innovation. With the opening up of the A-share market and increase weighting in the MSCI, changes to government's foreign ownership limits are a key area of interest for us.

Most of the stocks we own are supported by domestic demand and hence the impact of the China-U.S. trade uncertainty is limited as far as the strategy is concerned. However, we continue to keep a close eye on developments concerning the trade talks, and we remain watchful of company earnings following the imposition of tariffs. Should companies continue to generate positive earnings, this will be positive for markets.

While we have no unique insight into the path trade relations between the U.S. and China will take, we will continue to find quality companies managed by solid and reliable management. We believe Asia ex-Japan will continue to yield top-quality companies with durable businesses that can consistently expand through various economic cycles and manage positions over these cycles.

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 07-Oct-2019 Quarter to DateData as of 07-Oct-2019 Year to DateData as of 07-Oct-2019 1 MonthData as of 30-Sep-2019 3 MonthsData as of 30-Sep-2019
Fund % -0.13% -0.13% 11.35% 2.08% -0.39%
Indicative Benchmark % -0.68% -0.68% 5.00% 1.67% -4.50%
Excess Return % 0.55% 0.55% 6.35% 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. 

31-Aug-2019 - Eric C. Moffett, Portfolio Manager,
Asia ex-Japan equities fell for a second consecutive month in August as the trade conflict between the U.S. and China ramped up sharply after both sides imposed new tariffs on each other’s goods. Despite the markets’ weakness, our stock selection drove the outperformance within the portfolio. Our choices in China, particularly in Country Garden Service (CGS), which is supported by the world’s largest developer Country Garden Holdings, lifted returns. We like this asset light property management company with a strong growth profile, healthy margins and good cash flow. In Hong Kong, our stock selection, notably in HKT Trust, the only fixed line and mobile integrated player in the country, which has pricing power and strong balance sheet, worked well for us after it reported positive first-half results. From a sector perspective, our stock selection in the lagging industrials sector benefitted the portfolio, as did our stock choices among information technology names such as MediaTek , a Taiwanese fabless semiconductor company with a strong balance sheet and free cash flow. In contrast, our stock preferences in southeast Asian markets such as Indonesia crimped performance. Indonesian real estate developer PT Summarecon Agung fell in August following year-to-date gains.

Holdings

Total
Holdings
48
Largest Holding Tencent Holdings 7.23% Was (31-Mar-2019) 5.82%
Other View Full Holdings Quarterly data as of 30-Sep-2019
Top 10 Holdings 42.44% View Top 10 Holdings Monthly data as of 31-Aug-2019

Largest Top Contributor^

Samsung Electronics
By 0.41%
% of fund 5.63%

Largest Top Detractor^

Tencent Holdings
By -1.67%
% of fund 7.22%

^Absolute

Quarterly Data as of 30-Jun-2019

Top Purchase

HKT Trust & HKT Limited
5.22%
Was (31-Mar-2019) 3.29%

Top Sale

ITC (E)
0.00%
Was (31-Mar-2019) 1.99%

Quarterly Data as of 30-Jun-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

31-Aug-2019 - Eric C. Moffett, Portfolio Manager,
We moved less underweight to health care in August after we initiated a position in a Thai-based health care provider. It is the first company in Asia to receive the U.S. standard accreditation from the Joint Commission International, and we like its net cash position and its ability to keep costs under control. We also increased our allocation to high-conviction stocks, such as a Chinese e-commerce player that we believe is a strong earnings compounder. It reported solid core business growth for the quarter ended June despite heightened trade tensions and a slowing domestic economy.

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

31-Aug-2019 - Eric C. Moffett, Portfolio Manager,
We turned more overweight India after we took advantage of share price weakness to increase our position in the country’s financial companies, which we view as market share gainers. For instance, we added to our holdings in a non-bank financial company, which has been prudent in its lending practices compared to peers. It has a near monopoly, strong expertise, and has access to liquidity. We also increased our stake in a private bank that has good asset quality, strong balance sheet and experienced management team. We think it will deliver earnings growth and gain market share in a tight liquidity environment.

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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