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)

8.78%
$772.7m

1YR Return
(View Total Returns)

Manager Tenure

22.78%
7yrs

Information Ratio
(5 Years)

Tracking Error
(5 Years)

0.58
3.35%

Inception Date 31-Jan-2013

Performance figures calculated in USD

Other Literature

31-Jan-2020 - Anh Lu, Portfolio Manager,
We remain constructive on the long-term outlook for Asia ex-Japan equities. The recent turmoil from the coronavirus has created a short-term opportunity; however, market volatility will likely persist until we see clear signs that the outbreak is coming under control. China’s growth in the near term will likely be slower than expected and spill over to other economies. We expect Asian governments will roll out policies to help alleviate the impact of the coronavirus.
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.

 

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 (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 % 22.78% 8.78% 12.53% 6.93%
Indicative Benchmark % 17.83% 4.90% 10.60% 5.78%
Excess Return % 4.95% 3.88% 1.93% 1.15%

Inception Date 31-Jan-2013

Indicative Benchmark: MSCI All Country Asia ex Japan Index Net

Data as of  30-Sep-2020

Performance figures calculated in USD

  1 YR 3 YR
Annualised
5 YR
Annualised
Since Inception
Annualised
Fund % 22.78% 8.78% 12.53% 6.93%
Indicative Benchmark % 17.83% 4.90% 10.60% 5.78%
Excess Return % 4.95% 3.88% 1.93% 1.15%

Inception Date 31-Jan-2013

Indicative Benchmark: MSCI All Country Asia ex Japan Index Net

Data as of  30-Sep-2020

Performance figures calculated in USD

Recent Performance

  Month to DateData as of 23-Oct-2020 Quarter to DateData as of 23-Oct-2020 Year to DateData as of 23-Oct-2020 1 MonthData as of 30-Sep-2020 3 MonthsData as of 30-Sep-2020
Fund % 4.07% 4.07% 14.48% -1.36% 10.66%
Indicative Benchmark % 5.01% 5.01% 10.70% -1.50% 10.66%
Excess Return % -0.94% -0.94% 3.78% 0.14% 0.00%

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. 

30-Sep-2020 - Anh Lu, Portfolio Manager,
Asia ex-Japan equities retreated in September, driven by the elevated friction between the U.S. and China. Against this background, the portfolio delivered a negative absolute return but was in line with the benchmark’s performance. Stock selection in South Korea contributed positively. Samsung Electronics secured a contract to provide a 5G network solution to Verizon in the U.S. Moreover, it is seen to benefit from U.S. sanctions on Chinese firms. From a sector level, information technology (IT) supported performance. Indian software services firm Infosys rose as shares of Indian IT firms and exporters benefitted from U.S. dollar strength. The U.S. is a big market for Indian IT services. In contrast, stock selection in China and Hong Kong held back returns. Jiajiayue, a food retailer focusing on fresh products, took a breather after sharp gains as it has been a key beneficiary of the coronavirus pandemic. Hong Kong-listed Galaxy Entertainment hurt performance as the Macau casino operator’s share price fell on concerns that visitor numbers during the Golden Week Chinese holidays in October may not be as strong as expected. Chinese authorities in September resumed issuing tourist visas for visitors to Macau from China.

Holdings

Total
Holdings
74
Largest Holding Tencent Holdings 8.22% Was (30-Jun-2020) 8.86%
Other View Full Holdings Quarterly data as of 30-Sep-2020
Top 10 Holdings 47.95% View Top 10 Holdings Monthly data as of 30-Sep-2020

Largest Top Contributor^

Alibaba Group Holding
By 1.87%
% of fund 9.99%

Largest Top Detractor^

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

^Absolute

Quarterly Data as of 30-Sep-2020

Top Purchase

NARI Technology (N)
1.48%
Was (30-Jun-2020) 0.00%

Top Sale

Alibaba Group Holding
5.98%
Was (30-Jun-2020) 7.61%

Quarterly Data as of 30-Sep-2020

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

The portfolio invests in Asia-focused companies that feature strong and sustainable growth and/or solid potential for valuation multiple expansion over the long term. Each position is a result of our bottom-up stock selection based on fundamental research.

During the quarter, we continued to identify companies that may emerge from the crisis in a stronger position and benefit from a potential recovery. These tend to be companies that are leaders in their industry and continue to gain share in their sectors under adverse market conditions. We also looked at companies that have a strong capital structure that can allow them to weather a potentially prolonged downturn in business activity.

We pursued positions in better-quality companies that we found expensive prior to the coronavirus outbreak. This led to a reduced allocation in China as we found new compelling investment opportunities elsewhere such as in Hong Kong, Singapore, and Taiwan.

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 China, for instance, we look for companies that will benefit from the increasing demand for premium products while across countries, there may be opportunities in businesses that will benefit from consolidation in fragmented industries. Across the region, we also favor beneficiaries of import substitution as domestic companies come up with ways to replace imports with local products. When we think about our bottom-up stock picks, we also look at the extent of a company's innovation, not merely in the use of technology, but in other ways it seeks to improve market positioning.

We Turned Overweight Hong Kong; Added to Quality Growth Stocks

We moved to an overweight allocation in Hong Kong during the quarter, taking advantage of undemanding valuations following the market's weakness in the first half of the year, to boost our position in quality growth stocks and potential beneficiaries of a recovery that looked more compelling in value.

We added to our existing positions in AIA, Hong Kong Exchanges and Sun Hung Kai Properties while establishing a new position in Health and Happiness. AIA is a life insurer with an inimitable footprint in southeast Asia and a growing business in China and backed by a strong management team. It has secured approval to sell all its key products in Hong Kong with virtually no face-to-face requirement, raising hopes of a recovery in volumes for the domestic business. Moreover, it may be poised to gain market share across some regional businesses as some local rivals find it difficult to transition their businesses to online. In China, the insurer is looking at an acceleration of growth in agents in China, which augurs well for its expectations of a recovery in the value-of-new-business growth in 2021.

Hong Kong Exchanges and Clearing (HKEX) is the largest vertically integrated exchange in the region that in the quarter benefited from the trading volume growth and expectations of a potential increase in Chinese companies seeking a listing in Hong Kong. The U.S. Senate passed a bill in May that could force Chinese companies to withdraw from American stock exchanges if they do not comply with U.S. accounting standards. Although there has been no immediate impact yet, we believe the shift of Chinese companies' listings to Hong Kong will boost HKEX's profitability.

We also increased our positions in Sun Hung Kai Properties, a property developer and landlord that derives the bulk of its earnings from highly cyclical properties and residential developments in Hong Kong. We boosted our stake in the company due to its attractive valuation as it traded at about 50% discount to its net asset value with a 5% yield. In addition, the company is a beneficiary of a potential economic recovery in Hong Kong as the social unrest that has wracked Hong Kong since last year appeared to have stabilized, with no large protests or demonstrations held during the quarter.

We initiated a new position in Health and Happiness, a consumer company targeting younger demographics for its products that include high-end infant milk and nutrition supplements. Aside from the rising health and wellness trend in Asia, especially China, we believe the company is a beneficiary of the increasing demand for premium products in China.

We Sold Shares in China but Sought Recovery Beneficiaries

China was the portfolio's largest allocation at period-end, but we exited several names to give ourselves room to add stocks that will likely gain from a return to normalcy and eventual recovery in demand. We shifted some of our resources invested in China to better opportunities elsewhere during the quarter. We eliminated Minth Group, a supplier of exterior auto body parts; 58.com, a leading online marketplace for classified advertising; and ENN Energy following their gains during the second quarter.

We also closed our positions in transport infrastructure companies on the realization that it will take time for international travel to recover, while other businesses may see a faster turnaround or may benefit from a potential recovery from the coronavirus lockdown. Hence, we exited our positions in Shanghai International and Beijing Capital International Airport.

Within China, we preferred investments in businesses which may not have benefited from the coronavirus outbreak, but which instead may gain from the return to normal business activity. For instance, we built a position in Huayu Automotive Systems, a high-quality auto parts supplier, which will gain from a potential recovery in China auto volumes. Huayu's dominant market share in various segments gives it strong bargaining power over upstream suppliers, which in turn leads to strong free cash flow generation and stable margins. Its new business ventures will likely deliver gains for the company in two to three years.

We started investing in search engine Baidu on expectations of a recovery in the advertising market driven by a general improvement in the macroeconomic picture and helped partly by the company's cost control efforts.

Within China's health care sector, we increased our holdings in Sino Biopharmaceutical, a leading generic drug company and one of the highest-quality pharmaceutical companies in the country with a strong sales team and an efficient research and development system. We think the company is executing better given its improving pipeline, which may mean that it would be seeking more approvals over the next few years. Within the sector, we prefer names of better quality in terms of product cycle and future growth prospects.

We started to invest in Deppon Logistics, a logistics service provider, which has ventured into the fast-growing express segment. We like its profitable niche business, strong execution, undemanding valuation, and we expect it to benefit from the management change, new incentive system and technology investments in recent years.

Within Southeast Asia, Singapore Beckoned on Recovery Hopes After Reopening Economy

In Southeast Asia, we added to Singapore-listed names in the transport and real estate sectors as they stand to benefit from potential recovery as the city-state in June further eased one of the world's toughest coronavirus lockdowns after more than two months. The positions are in line with our search for companies that may emerge from the coronavirus outbreak in a stronger position. For instance, we initiated a position in ComfortDelGro, a land transport company that has the balance sheet and cashflows to weather the near-term difficulties brought about by the outbreak, supported by a decent dividend yield. We see an earnings recovery in 2021 once the coronavirus crisis recedes. We turned less overweight �in industrial and business services and became slightly overweight Singapore.

We added to our position in Frasers Centrepoint, a local real estate investment trust that is operating a shopping mall. We believe it will hold up relatively well given its suburban retail exposure which should be more resilient to the impact of the coronavirus outbreak. We like its undemanding valuations and the return of normalcy in business activities in Singapore augurs well for the company.

Information Technology Allocation Increased on Boost from Stimulus Packages

We invested in firms that may benefit from the stimulus measures deployed by governments to mitigate the impact of the coronavirus outbreak, resulting in our overweight allocation in information technology from the previous quarter's neutral position. We invested in Vanguard International Semiconductor and increased our stake in Taiwan Union Technology as we think that stimulus packages will include measures to encourage enterprises to upgrade their technology, which favor select hardware companies.

Vanguard, a unit of Taiwan Semiconductor Manufacturing, focuses on 8-inch wafer fabrication foundry services. We expect the 8-inch wafer supply to be tight over the longer term owing to the limited incremental 8-inch wafer capacity expansion mainly due to lack of depreciated tools in the market. We view Vanguard as a well-managed company with good corporate governance, and a steady dividend growth over time. Moreover, it may be less affected by U.S.-China trade tensions which centers more on leading-edge technology. Taiwan Union is a maker of materials of printed circuit boards, which we think will benefit from the expected growth in data centers. These new positions reduced our underweight in Taiwan.

Sectors

Total
Sectors
10
Largest Sector Information Technology 22.41% Was (31-Aug-2020) 20.13%
Other View complete Sector Diversification

Monthly Data as of 30-Sep-2020

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

Top Contributor^

Industrials & Business Services
Net Contribution 0.84%
Sector
-0.05%
Selection 0.89%

Top Detractor^

Consumer Staples
Net Contribution -0.83%
Sector
-0.32%
Selection
-0.51%

^Relative

Quarterly Data as of 30-Sep-2020

Largest Overweight

Consumer Staples
By4.97%
Fund 10.09%
Indicative Benchmark 5.12%

Largest Underweight

Materials
By-3.78%
Fund 0.00%
Indicative Benchmark 3.78%

Monthly Data as of 30-Sep-2020

30-Sep-2020 - Anh Lu, Portfolio Manager,
We added to our existing names in the IT sector with good growth prospects. We boosted our stake in a Taiwanese chip designer which in our view remains a key 5G solution provider for Chinese smartphone makers even as the U.S. expanded its curbs on Huawei Technologies. Moreover, we bought more of an Indian IT firm that delivered better-than-expected results and resumed giving guidance, which the market took as a sign of confidence that reflects the company’s ability to win large deals. We believe it is well placed to improve margins given that its investment phase is largely over.

Countries

Total
Countries
11
Largest Country China 45.85% Was (31-Aug-2020) 47.66%
Other View complete Country Diversification

Monthly Data as of 30-Sep-2020

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

Top Contributor

N/A

Top Detractor

N/A

Largest Overweight

Hong Kong
By2.35%
Fund 10.07%
Indicative Benchmark 7.72%

Largest Underweight

South Korea
By-4.31%
Fund 9.14%
Indicative Benchmark 13.45%

Monthly Data as of 30-Sep-2020

30-Sep-2020 - Anh Lu, Portfolio Manager,
We trimmed our exposure to China as we consolidated the travel-related names that we owned, focusing more on domestic travel. Hence, we exited Trip.com, a dominant online travel agency, taking advantage of its share price recovery after a sharp fall in the first quarter. While its second-quarter results were better than expected, outbound travel remains at a minimal level. While we exited Trip.com, we initiated a position in one of the hotel operators in China, where we have higher conviction. We view it as one of the most efficient hotel operators that can potentially lead the consolidation of non-branded hotels.

Team (As of 01-Oct-2020)

Anh Lu

Anh Lu is a portfolio manager in the Equity Division of T. Rowe Price Hong Kong Limited. Ms. Lu is the lead portfolio manager for the Asia ex-Japan Equity Strategy. She is a vice president of T. Rowe Price Group, Inc. and T. Rowe Price Hong Kong Limited.

Ms. Lu has 24 years of investment experience, 18 of which have been with T. Rowe Price. Prior to joining the firm, she was a vice president of the Asia Pacific Technology Investment Banking Division of Salomon Smith Barney in Hong Kong. Before Salomon Smith Barney, Ms. Lu spent three years at LGT Asset Management as an analyst and portfolio manager.

Ms. Lu earned a B.A. with honours from the University of Western Ontario.

  • Fund manager
    since
    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
    15
  • Years investment
    experience
    19

Fee Schedule

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

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

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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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