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GIPS® Information

T. Rowe Price ("TRP") claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. T. Rowe Price has been independently verified for the twenty four-year period ended June 30, 2020, by KPMG LLP. The verification report is available upon request. A firm that claims compliance with the GIPS standards must establish policies and procedures for complying with all the applicable requirements of the GIPS standards. Verification provides assurance on whether the firm’s policies and procedures related to composite and pooled fund maintenance, as well as the calculation, presentation, and distribution of performance, have been designed in compliance with the GIPS standards and have been implemented on a firm-wide basis. Verification does not provide assurance on the accuracy of any specific performance report.

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SICAV

Asian ex-Japan Equity Fund

A diversified fund, with a focus on sustainable growth.

ISIN LU0860350064 Bloomberg TRPAXJQ:LX

3YR Return Annualised
(View Total Returns)

Total Assets
(USD)

13.43%
$1.2b

1YR Return
(View Total Returns)

Manager Tenure

63.51%
8yrs

Information Ratio
(5 Years)

Tracking Error
(5 Years)

0.62
3.35%

Inception Date 31-Jan-2013

Performance figures calculated in USD

28-Feb-2021 - Anh Lu, Portfolio Manager,
We see pockets of excessive optimism in Asia ex-Japan, but we believe that valuations of many high-quality growth businesses are not too demanding once we factor in earnings durability and growth. Broadly, valuations have normalised but the gap between the region versus developed markets is still wide. On earnings, the extent of improvement will depend on the pace of economic normalisation. We remain constructive on the medium- to longer-term outlook for Asia ex-Japan equities.
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 on the medium- to longer-term outlook for Asia ex-Japan equities. While the impact of the coronavirus pandemic varies across the region, compared to other parts of the world, much of Asia has seen more effective COVID-19 containment measures while the relative deterioration in fiscal and current account balances is more manageable. Domestic demand generally recovered quickly in the region following the initial shock from the coronavirus and the consumption recovery is likely to broaden.

Regional equity markets have started to reflect the optimism stemming from the faster-than-expected development of coronavirus vaccines, their efficacy and potential successful rollout, raising expectations of a return to more normal conditions despite the production and distribution complexities. Valuations have normalized but the gap between the region versus developed markets is still wide. While there are pockets of excessive optimism in stocks within the biotechnology, electric vehicle, and software industries, we believe that many high-quality growth businesses are still trading at reasonable multiples. The combination of lower global rates and structural improvements in state finances has lowered the cost of capital and bodes well for valuations.

The year ahead should see the recovery in China, the first major economy to return to growth following the damage wrought by the pandemic, gaining in pace and extending to the rest of Asia where control of the coronavirus will likely improve and low-base effects will elevate year-on-year numbers. We expect healthier earnings growth in 2021 and beyond, though the magnitude of earnings improvement will depend on the pace of economic normalization. Hence, there are some risks of earnings downgrades in 2021 should the success of the vaccines fall behind expectations.

Other key risks include a premature and faster-than-expected tightening of liquidity and a flaring up of tensions between the U.S. and China under President Biden's administration which may disappoint investors expecting a de-escalation of fractious relations. Our base case is that friction between the U.S. and China will likely persist, with areas of contention focusing on technology, national security, and economic protectionism.

We believe that our fundamental research and long-term focus should help us weather the near-term disruption brought about by the coronavirus pandemic.

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 Q)

Annualised Performance

  1 YR 3 YR
Annualised
5 YR
Annualised
Since Inception
Annualised
Fund % 63.51% 13.43% 15.86% 9.21%
Indicative Benchmark % 57.31% 8.88% 13.79% 8.00%
Excess Return % 6.20% 4.55% 2.07% 1.21%

Inception Date 31-Jan-2013

Indicative Benchmark: MSCI All Country Asia ex Japan Index Net

Data as of 31-Mar-2021

Performance figures calculated in USD

  1 YR 3 YR
Annualised
5 YR
Annualised
Since Inception
Annualised
Fund % 63.51% 13.43% 15.86% 9.21%
Indicative Benchmark % 57.31% 8.88% 13.79% 8.00%
Excess Return % 6.20% 4.55% 2.07% 1.21%

Inception Date 31-Jan-2013

Indicative Benchmark: MSCI All Country Asia ex Japan Index Net

Data as of 31-Mar-2021

Performance figures calculated in USD

Recent Performance

  Month to DateData as of 13-Apr-2021 Quarter to DateData as of 13-Apr-2021 Year to DateData as of 13-Apr-2021 1 MonthData as of 31-Mar-2021 3 MonthsData as of 31-Mar-2021
Fund % 0.19% 0.19% 4.95% -0.77% 4.75%
Indicative Benchmark % 0.71% 0.71% 3.43% -2.54% 2.70%
Excess Return % -0.52% -0.52% 1.52% 1.77% 2.05%

Inception Date 31-Jan-2013

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.

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. 

28-Feb-2021 - Anh Lu, Portfolio Manager,
Most equities across Asia ex-Japan advanced in February but underperformed their developed counterparts. Sentiment was boosted by the coronavirus vaccine rollout in many parts of the world, a huge U.S. stimulus package and India’s growth-focused annual budget; however, concerns about inflationary pressures capped share price gains. Within the portfolio, stock selection in India held back relative returns, offsetting the positive impact of our overweight in this outperforming market. Our lack of exposure to conglomerate Reliance Industries, which benefitted from higher oil prices, hurt. Our stock choices in industrials and business services also crimped performance. Shares of NARI Technology, which makes electrical equipment in China, fell following sharp gains in recent months. The market views the company as a beneficiary of the secular future trend for China’s greater reliance on renewable energy. In contrast, consumer discretionary added due to stock selection. Not owning NIO was beneficial as shares of the Chinese electric vehicle maker slumped after rallying in recent months following a drop in February deliveries and a global microchip shortage. Owning casino operator Galaxy Entertainment helped following the Macau government’s decision to lift the last of the travel restrictions for visitors from mainland China.

Holdings

Total
Holdings
81
Largest Holding Samsung Electronics 8.63% Was (30-Sep-2020) 7.54%
Other View Full Holdings Quarterly data as of  31-Mar-2021
Top 10 Holdings 44.19% View Top 10 Holdings Monthly data as of  31-Mar-2021

Largest Top Contributor^

Samsung Electronics
By 1.37%
% of fund 9.27%

Largest Top Detractor^

Alibaba Group Holding
By -5.20%
% of fund 6.35%

^Absolute

Quarterly Data as of 31-Dec-2020

Top Purchase

Taiwan Semiconductor Manufacturing
7.89%
Was (30-Sep-2020) 6.88%

Top Sale

Huayu Automotive Systems (E)
0.00%
Was (30-Sep-2020) 1.18%

Quarterly Data as of 31-Dec-2020

31-Dec-2020 - Anh Lu, Portfolio Manager,

In the final quarter of 2020, with the overall market focus tilting towards a return to normality and shifting away from those companies that had benefited from the pandemic, we initiated positions in businesses that will likely emerge even stronger once conditions normalize but whose potential the market has yet to fully recognize.

We continued to pursue cyclical growth companies that have been hurt by prolonged lockdowns and will gain from a return to more normal conditions. These are businesses with secular growth opportunities that have been hampered by a cyclical downturn due to the coronavirus outbreak. We have put these cyclical growth companies into two buckets. First, growth stocks that were sold off due to the pandemic and traded at unjustifiably low. We believe they offer attractive risk/reward prospects in a scenario where the pandemic abates. Secondly, high-quality cyclical stocks such as some technology companies that were already benefiting from the adoption of online trends before the pandemic and are continuing to benefit as people stay at home.

During the quarter, we favored more innovative companies with management teams that can navigate, respond and identify opportunities in rapidly changing environments. By innovation, we do not solely refer to the use of technology, but other strategic and enterprising ways a company seeks to improve its market positioning.

Our portfolio positioning remains bottom-up driven and we continue to prefer companies that may be able to gain market share in consolidating industries while also having a strong enough capital structure to weather a potentially prolonged downturn in business activity. We favor stocks with multi-year growth stories and are not merely mean-reversion opportunities.

Information Technology

The portfolio has a substantial exposure to the information technology (IT) sector as we seek to benefit from the long-term growth in demand for memory chips and the surging cloud services market that has continued to increase its share in the global IT spend. The pandemic has brought about a surge in videoconferencing, online shopping, streaming services, and video gaming, increasing the reliance on cloud computing where data is stored, and applications are processed in centralized data centers with users able to access the technology over the internet.

  • We increased our exposure to IT services as we bought a position in GDS Holdings, a private datacenter company in China. GDS has been benefiting from structural cloud demand and growing its share above the market due to its superior execution by its stable management team that is return-focused and diversified client base. We believe GDS is one of the highest quality cloud companies in China offering value-added services and stands out from other datacenter companies that end up as pure tech real estate providers. We are optimistic about its long-term demand trajectory as Chinese companies that started out with a public cloud service increasingly move towards hybrid or private clouds and GDS will benefit from such a trend.

Consumer Discretionary

We have a sizeable absolute position in the consumer discretionary sector. We own companies that we believe may exhibit higher growth potential especially as the rollout of vaccines is likely to boost demand for their products and services. We have positions in companies that will benefit from long-term trends such as the strength of Asian consumption supported by increasing household income and the deepening penetration of ecommerce, accelerated by the coronavirus pandemic. 2020 brought forward potentially years of growth in ecommerce as people grew accustomed to working, shopping and consuming media from home, a pronounced shift that benefited established online companies as well as nascent ones. For one, the pandemic increased online grocery shopping in Asia and this behavior could persist even after the end of the pandemic.

  • We sought to diversify our exposure to the China online space by establishing a position in Pinduoduo. We believe Pinduoduo, where Tencent has a stake, is able to grow the ecommerce market, helped in part by its differentiated positioning as a marketplace for value-for-money products. We initially deemed that Pinduoduo would have difficulty competing with bigger rivals such as Alibaba, but in the last 12-18 months it has found innovative ways to help grow the ecommerce pie. Its community grocery business will likely be a new growth driver.
  • We invested in New Oriental Education, a Chinese after-school tutoring provider that we view as a market share gainer. The company will likely benefit from increased demand for offline tutoring services as living conditions return to normal. While it has a small online learning subsidiary, the company generates the bulk of its revenues from its nationwide network and learning centers in China.

Consumer Staples

We have a significant exposure to consumer staples. Domestic consumption remains an overarching theme in our portfolio. We believe that Asian households are generally under levered and consumption is a secular opportunity. In the quarter, we reduced our allocation to this sector as we switched to more cyclical growth companies that stand to gain from a recovery once the pandemic subsides. However, we still made a company-specific initiation during the period.

  • We bought Amorepacific, the largest domestic cosmetics company in South Korea with a growing international business. The coronavirus pandemic and the tenuous China-South Korea relationship have contributed to its depressed earnings, but the vaccine news bodes well for its business and we think that at some point the China-South Korea geopolitical issues can be resolved. We view the company's efforts to clean up its distribution system, cut costs, and launch new products as positive.
  • We sold Jiajiayue Group, a food retailer in China with high revenue exposure to fresh products, after it had a strong run in the first half of 2020 during the pandemic. Heightened competition in the online grocery segment with the entry of new companies also hurt the stock. Its rivals have adopted a "community group-buy" model that taps community leaders to collect grocery products needed by their respective neighborhoods through an app. This change to the competitive landscape could scale up fast and potentially affect Jiajiayue's operations.��

Communication Services

The portfolio has a sizable position in the communication services sector in absolute terms. Our focus here is on social media platforms and search engine companies that are benefiting from developments such as increased remote working and consumption of goods and services from home.

  • We sold shares in Baidu, the dominant search engine in China, as we viewed its recent acquisition of a video streaming business as lacking in synergy with its core business.
  • We invested in Converge ICT Solutions, a Philippine-based fixed broadband company that has gained market share in a two-player underpenetrated market. We think it 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.

Materials

We do not have significant exposure in materials, a traditional value pocket, given our mandate and a dearth of sustainable growth opportunities in this economically sensitive sector.

  • With the positive news of vaccine rollout programs and fiscal stimulus measures in parts of the world, particularly outside Asia, we took the opportunity to buy POSCO, one of the world's largest steel producers. Its fundamentals are recovering, which were affirmed by its better-than-consensus solid earnings execution. We believe the recent improvement in the demand-supply dynamic and steel margin will be more sustained this time around. POSCO is expected to benefit from a recovery in auto steel demand and pick-up in shipbuilding orders.

Sectors

Total
Sectors
10
Largest Sector Information Technology 26.27% Was (28-Feb-2021) 25.20%
Other View complete Sector Diversification

Monthly Data as of 31-Mar-2021

Indicative Benchmark: MSCI All Country Asia ex Japan Index

Top Contributor^

Communication Services
Net Contribution 0.92%
Sector
0.03%
Selection 0.89%

Top Detractor^

Financials
Net Contribution -0.41%
Sector
-0.07%
Selection
-0.34%

^Relative

Quarterly Data as of 31-Mar-2021

Largest Overweight

Industrials & Business Services
By3.87%
Fund 9.32%
Indicative Benchmark 5.45%

Largest Underweight

Materials
By-3.26%
Fund 1.28%
Indicative Benchmark 4.54%

Monthly Data as of 31-Mar-2021

28-Feb-2021 - Anh Lu, Portfolio Manager,
The portfolio has a substantial exposure to the information technology (IT) sector in absolute terms. We expected investments in IT infrastructure to rise strongly as the spread of the coronavirus would accelerate the adoption of trends that will last beyond the pandemic. COVID-19 has brought about a surge in videoconferencing, online shopping, streaming services, and video gaming, increasing the reliance on cloud computing. We believed that demand for memory chips and high-performance computing would accelerate so we added to the existing IT names we held such as Taiwan Semiconductor, Samsung Electronics, MediaTek and Infosys.

Countries

Total
Countries
11
Largest Country China 41.59% Was (28-Feb-2021) 40.22%
Other View complete Country Diversification

Monthly Data as of 31-Mar-2021

Indicative Benchmark: MSCI All Country Asia ex Japan Index

Top Contributor

N/A

Top Detractor

N/A

Largest Overweight

India
By2.15%
Fund 13.01%
Indicative Benchmark 10.86%

Largest Underweight

South Korea
By-4.19%
Fund 10.80%
Indicative Benchmark 14.99%

Monthly Data as of 31-Mar-2021

28-Feb-2021 - Anh Lu, Portfolio Manager,
China remains our biggest absolute country position, but we increased our underweight position at the end of last year. China was the first to emerge from the crisis, finishing 2020 as one of the top-performing global equity markets. As a result, valuation in some pockets of the market started to look demanding prompting us to take profit. Separately, there are risks that some of our investment thesis would be delayed due to prolonged lockdowns. Hence, we reduced our exposure to travel-related companies. We redeployed the proceeds from China into Hong Kong, India, and Singapore.

Team (As of 14-Apr-2021)

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
    2013
  • 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
    16
  • Years investment
    experience
    20

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.