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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)

14.46%
$1,266.0m

1YR Return
(View Total Returns)

Manager Tenure

54.01%
8yrs

Information Ratio
(5 Years)

Tracking Error
(5 Years)

0.43
3.30%

Inception Date 31-Jan-2013

Performance figures calculated in USD

31-May-2021 - Anh Lu, Portfolio Manager,
We remain constructive about the long-term outlook for Asia ex-Japan equities. India, however, may be poised for a more challenging recovery from the second wave and the acceleration of the vaccine rollout is key. While the supply of vaccines is unlikely to pose a problem, the ability to execute may be a risk in India. On China, the focus will probably be on the quality of economic growth and moving up the innovation curve.
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. Most of Asia, particularly North Asia, has fared relatively well in containing the spread of the coronavirus, and the deterioration in fiscal and current account balances has been manageable. Domestic demand generally recovered quickly in the region, and the consumption recovery appears to be broadening. The significant progress of the vaccine rollout programs also boosted investor sentiment, focusing investors' interest on the reopening of economies. Overall, we believe that prospects for economic and corporate profit growth in the region have improved.

In terms of valuations, while there are pockets of excessive optimism in some sectors, such as in China's biotechnology and electric vehicle space, we believe that many high-quality growth businesses in Asia ex-Japan are still trading at reasonable multiples. The correction in China A-shares during the quarter from last year's hefty gains may also create attractive opportunities. The Chinese authorities have warned against overheating the economy, and we are not too concerned by gradual policy tightening. China adopted a conservative stance in stimulus measures to address the impact of the pandemic. Hence, we believe it has considerable scope for easing if economic conditions were later to require a loosening of policies.

We expect healthier earnings growth in 2021 and beyond, although the magnitude of earnings improvement will depend on the pace of economic normalization. Hence, there are some risks of earnings downgrades should the success of the vaccines fall behind expectations.

Some investors are worried that the economic recovery may cause rising inflation that leads to multiple compression. While we do not hold strong macro directional views, we believe that inflationary environment risks may be countered by our search for companies with robust fundamentals and good visibility for earnings growth, as well as high-quality businesses where multiples are not too stretched.

Aside from inflation concerns and pockets of extreme valuations, we remain cognizant of other market risks such as prolonged lockdowns and geopolitical tensions. A flaring up of tensions between the U.S. and China under President Biden's administration 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. Lastly, an increase in U.S. corporate tax rates under President Biden could have significance far beyond America's borders if it inspires money to flow out of the U.S. and into the Asian region.

We believe that our portfolio is well positioned for regional recovery and that our fundamental research and long-term focus should help us to identify businesses that can emerge from the crisis stronger.

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.
  • Environmental, social and governance ("ESG") factors with particular focus on those considered most likely to have a material impact on the performance of the holdings or potential holdings in the funds’ portfolio are assessed. These ESG factors, which are incorporated into the investment process alongside financials, valuation, macro-economics and other factors, are components of the investment decision. Consequently, ESG factors are not the sole driver of an investment decision but are instead one of several important inputs considered during investment analysis.

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 % 54.01% 14.46% 16.55% 9.38%
Indicative Benchmark % 51.52% 10.44% 15.14% 8.31%
Excess Return % 2.49% 4.02% 1.41% 1.07%

Inception Date 31-Jan-2013

Indicative Benchmark: MSCI All Country Asia ex Japan Index Net

Data as of 31-May-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 15-Jun-2021 Quarter to DateData as of 15-Jun-2021 Year to DateData as of 15-Jun-2021 1 MonthData as of 31-May-2021 3 MonthsData as of 31-May-2021
Fund % -0.66% 2.14% 6.99% 0.91% 2.03%
Indicative Benchmark % -0.35% 3.37% 6.16% 1.22% 1.10%
Excess Return % -0.31% -1.23% 0.83% -0.31% 0.93%

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. 

31-May-2021 - Anh Lu, Portfolio Manager,
Most Asia ex-Japan equity markets rose in May, performing broadly in line with their developed market counterparts. The improving global economic outlook and a weaker U.S. dollar helped gains although higher-than-expected inflation in the U.S., which triggered concerns about tighter monetary policy worldwide, soured investor sentiment. The rise in COVID-19 cases in India, Malaysia, Taiwan, and Singapore also capped advances. Within the portfolio, stock selection in China hurt relative returns. Shares of JOYY Inc, a large China-based live streaming platform, fell following sharp gains in the first quarter. In February, JOYY completed the sale of its domestic live streaming business. New Oriental Education, an after-school tutoring provider, also curbed returns as education names fell sharply after Chinese President Xi Jinping called for tighter regulation of the tutoring industry. In contrast, Compagnie Financière Richemont, the owner of Cartier, benefitted the portfolio as it proposed doubling its dividend back to pre-pandemic levels following strong demand for jewellery and its Asia Pacific performance that lifted sales. Stock selection and overweighting India added further value. HDFC Bank benefitted as coronavirus cases appeared to have peaked in India, which sparked some bargain hunting among investors.

Holdings

Total
Holdings
88
Largest Holding Taiwan Semiconductor Manufacturing 9.12% Was (31-Dec-2020) 7.94%
Other View Full Holdings Quarterly data as of  31-Mar-2021
Top 10 Holdings 40.66% View Top 10 Holdings Monthly data as of  31-May-2021

Largest Top Contributor^

Taiwan Semiconductor Manufacturing
By 2.13%
% of fund 8.98%

Largest Top Detractor^

Samsung Electronics
By -1.39%
% of fund 7.18%

^Absolute

Quarterly Data as of 31-Mar-2021

Top Purchase

Taiwan Semiconductor Manufacturing
8.97%
Was (31-Dec-2020) 7.94%

Top Sale

AIA Group
2.64%
Was (31-Dec-2020) 4.31%

Quarterly Data as of 31-Mar-2021

31-Mar-2021 - Anh Lu, Portfolio Manager,

We believe the portfolio is well positioned in high-quality, cyclical, and growth-oriented stocks�that will benefit from the recovering global economic conditions.

In the quarter, we sought to balance the portfolio by seeking high-quality growth stocks where multiples are not too stretched on the one hand, and on the other by finding good opportunities in businesses benefiting from cyclical recovery with secular growth opportunities as well as reasonable multiples.

We used weakness in some of the high-quality growth names to slowly add to them and among the high-growth stocks we favored, we picked those whose business models have shown to work and hence have become less risky over time, in our view.

Broadly, we continued our preference for sector leaders that are able to gain market share and consolidate the industry. Our propensity is to own companies that have strong capital structure to weather a potentially prolonged downturn in business activity.

Our portfolio positioning remains bottom-up driven and we are inclined to own stocks with multi-year growth stories and are not merely mean-reversion opportunities. We pursue innovative companies with management teams that can navigate, respond to, 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 may seek to improve its market positioning.

Industrials and Business Services

The portfolio has a sizeable exposure to the industrials and business services sector in relative terms. We own stocks that we believe�are market share gainers in their industry and are likely to benefit from the reopening of the global economy. We also have positions in businesses that we believe will likely gain from the trend toward environmental protection and greater reliance on renewable energy, especially in China.

We are positive about the sector as many classic industrial businesses are looking more like technology companies, which in our view could be an area of growth especially in China. These companies could deliver strong potential performance over the next few years.

  • We bought Hongfa Technology, a Chinese maker of relays used in autos, appliances, electric vehicles, and smart meters which we see as a share gainer in a growing industry. We view this stock as a long-term growth story with an undiscounted upside margin.
  • We bought Container Corporation of India, a container rail freight transportation company with a leading market share. Its strong network of inland container depots will likely benefit from a significant volume shift to railways from roads once the dedicated freight corridor is in place later this year, as it is connected to the main ports.
  • We invested in Beijing Capital, one of China's largest airports,�which we believe�will likely benefit from a recovery in earnings after the pandemic with the resumption of international passenger volume and passenger duty-free spending.

Communication Services

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

  • We bought JOYY, one of the largest video live streaming platforms in China, which completed the sale of its domestic video live streaming business to Baidu, a dominant search engine in China. It also owns BIGO, which includes Bigo Live, a live streaming app for Southeast Asian countries and Likee, a short-form video app. Live streaming has been growing in China for many years and has emerged as a monetization tool for most major apps. We believe that overseas markets will follow such a trend and JOYY through BIGO will likely be an early mover in its overseas businesses.
  • We bought Baidu following encouraging first-quarter guidance due to a rebound in the advertising business. We were also encouraged by the monetization potential of its Apollo Auto platform. Baidu has invested in autonomous driving in the past seven years and has established its autonomous driving unit Apollo which mainly supplies technology powered by artificial intelligence and which works with automakers. Baidu is setting up a company with carmaker Zhejiang Geely Holding Group to make smart electric vehicles.

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 accelerated demand for 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. In the quarter, we bought positions in companies with high-growth potential and reinvention story.

  • We invested in Glodon, a company with 70% market share in China's construction software market. We expect Glodon to deliver significant revenue upside and free cash flow margin expansion over the next few years. We took the opportunity to acquire the company's stock, which had fallen sharply from its peak during the quarter.
  • We bought shares of Taiwan-based Hon Hai Precision Industry, one of the world's biggest contract electronics manufacturers, as it starts to reinvent itself in the era of electric vehicles. The major supplier to Apple Inc has announced several deals with automakers on the production of electric vehicles. While it may be early days, we liked Hon Hai's track record in the phone assembly business, which we believe�augurs well for its new venture.
  • We sold Largan Precision, a Taiwanese high-precision handset camera lens maker, as it was losing share to Chinese rivals. Its weaker competitive position prompted us to eliminate the stock from the portfolio.

Health Care

We increased our allocation in health care, where our focus is on high-quality pharmaceutical companies and select other areas. During the quarter, we started investing in names that we believe offer good growth prospects.

  • We built a position in I-Mab, a China-based clinical stage biopharmaceutical company committed to discovering and developing highly differentiated biologics to treat diseases such as cancers and autoimmune disorders. It has niche products such as a long-acting recombinant human growth hormone with good commercialization potential in China.
  • We invested in New Horizon Health, a pioneer in China's colorectal cancer screening market. Its ColoClear product is the first and the only early cancer detection product that has been approved by the National Medical Products Administration, formerly China's State Food and Drug Administration.

Financials

We have a sizeable absolute position in the financial sector, and own businesses across the region. This ranges from Indian banks with high-quality lending franchises such as Kotak Mahindra Bank to Chailease, a Taiwanese leasing company with an increasing China and southeast Asian business, that we believe will likely benefit from the cyclical recovery post COVID-19.

  • We reduced our positions in AIA and Hong Kong Exchanges & Clearance, the largest vertically integrated exchange in the region, on the back of their demanding valuations. We continue to believe these are good businesses. AIA is a life insurer with a unique footprint in southeast Asia and a growing China business, a strong management team and sound capital position.
  • We added to our holdings in Ping An Insurance, which has been a laggard over the last year. We believe the market underestimates the scope of recovery of Ping An's value of new business after the pandemic.

Sectors

Total
Sectors
10
Largest Sector Information Technology 25.64% Was (30-Apr-2021) 25.85%
Other View complete Sector Diversification

Monthly Data as of 31-May-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
By3.59%
Fund 9.40%
Indicative Benchmark 5.81%

Largest Underweight

Financials
By-3.72%
Fund 14.56%
Indicative Benchmark 18.28%

Monthly Data as of 31-May-2021

31-May-2021 - Anh Lu, Portfolio Manager,
We have a substantial exposure to the information technology (IT) sector. We favour semiconductors, hardware names and IT services providers with valuations that are not too rich, and which are more levered to the global recovery. We like innovative type of companies within this space. For example, we hold a position in Hon Hai Precision Industry, which has started to reinvent itself in the era of electric vehicles (EVs). The major supplier to Apple Inc has announced several deals with automakers on the production of EVs although it may be early days yet.

Countries

Total
Countries
11
Largest Country China 44.35% Was (30-Apr-2021) 43.62%
Other View complete Country Diversification

Monthly Data as of 31-May-2021

Indicative Benchmark: MSCI All Country Asia ex Japan Index

Top Contributor

N/A

Top Detractor

N/A

Largest Overweight

China
By1.37%
Fund 44.35%
Indicative Benchmark 42.98%

Largest Underweight

South Korea
By-6.54%
Fund 8.29%
Indicative Benchmark 14.82%

Monthly Data as of 31-May-2021

31-May-2021 - Anh Lu, Portfolio Manager,
Taiwan is one of our largest absolute country positions. In this market, we own mostly technology stocks such as semiconductors including TSMC, the world’s largest dedicated foundry with about 60% capacity share for the most advanced memory chips. Demand for its advanced node chip, its growth driver, has been robust due to the continued 5G smartphone upgrade and high-performance computing customer growth. We also hold favourable analog semiconductor names and a chip designer. We own non-technology names including Chailease, a leasing company with an increasing China and southeast Asian business that will likely benefit from the post-coronavirus recovery.

Team (As of 10-Jun-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 25 years of investment experience, 19 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
    20
  • Years investment
    experience
    26
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.