China Evolution Equity Fund

Capitale a rischio. I rendimenti passati non sono indicativi dei risultati presenti o futuri e non dovrebbero essere l'unico fattore considerato per selezionare un prodotto o una strategia.

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Panoramica

Manager's Outlook

We are positive on the outlook for Chinese equities in 2021 for three key reasons. First, China is expected to lead the recovery of Asia Pacific economies thanks to successful early control of the virus as many nations still struggle to emerge from the pandemic. Vaccine rollouts as well as the promotion of vaccine passports will likely accelerate the reopening of borders, providing a strong case for a pickup in economic activities. Second, the World Bank forecasts China's economy to expand by more than 8% in 2021, compared with 2.3% in the previous year, implying rapid expansion from multiple growth engines Third, despite being the world's second-largest economy, Chinese equities are still underrepresented in global indices. The equity market is poised to gain as the index weightings gradually normalize.

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In our view, China has done enough to successfully reflate its own economy. One consequence of China's early recovery is that expectations of fresh stimulus have been dampened. At the same time, there is no sign that the government will tighten policy prematurely. Rather, it appears to be taking a "wait and see" approach that could prevail for the next couple of quarters.

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The durability of the recovery in 2021 will require a shift in the sources of growth toward the consumer, including those consumer services that suffered most from the pandemic. The prospects for consumer demand look good: Auto sales, a key gauge of consumer confidence, ended last year above 2019 levels. Successive holidays and consumer festivals saw improving consumer confidence and pent-up demand. Residential property has rebounded, supported by a recovery in household income.

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The positive fundamental outlook for Chinese equities in 2021 is even more attractive in relative terms given the still uncertain outlook for many other economies, both developed and emerging. We expect the consumer to play a bigger role in driving China's economic growth next year.

Strategia

Riepilogo del fondo

Il nostro approccio mira a individuare titoli di società in cui il cambiamento e il potenziale di crescita sono sottostimati o non ancora rilevati. Mettendo a frutto la nostra lunga esperienza d'investimento in Cina, miriamo a identificare società innovative diverse dai titoli ad alta capitalizzazione ampiamente partecipati, che offrono un potenziale a lungo termine di crescita stabile o in accelerazione oppure di rivalutazione dei fondamentali. Il fondo non è vincolato a benchmark, ma questo viene utilizzato solo a scopo di comparazione performance.

Performance - Al netto delle commissioni

I rendimenti passati non costituiscono una previsione di quelli futuri.

31-ago-2021 - Wenli Zheng, Regional Portfolio Manager,

Le azioni cinesi si sono apprezzate in agosto, nel contesto di riforme normative mirate che hanno coinvolto diversi settori tra cui le piattaforme internet, l'istruzione privata, la privacy e protezione dei dati, i giochi online, i servizi di streaming video, le consegne pasti, il ride hailing, il comparto farmaceutico e quello degli alcolici. All'interno del portafoglio, tra i contributi migliori spicca quello di Li Ning, azienda leader di articoli sportivi sul mercato domestico che ha diffuso una trimestrale robusta grazie all'offerta di prodotti migliorata e alla crescente preferenza dei consumatori cinesi per i marchi locali. In progresso anche la società di attrezzature elettriche NARI Technology, che ha continuato a evidenziare una crescita degli utili sempre più rapida, revisioni al rialzo delle stime e redditività in miglioramento. Il titolo è stato risparmiato dalla correzione recente provocata dai timori per la stretta normativa, poiché la società sembra godere del favore del governo visto il ruolo che svolge sul fronte delle rinnovabili. Male invece Guangdong Kinlong Hardware Products, leader nel settore dei materiali metallici per applicazioni in architettura, che ha pagato il rincaro delle materie prime con un calo dei profitti pesando sulla performance del fondo. Un altro impatto negativo è derivato dalla società di gestione immobiliare Country Garden Services che, nonostante l'impennata dei profitti nella prima metà dell'anno, ha visto crollare il prezzo azionario sui timori che il settore immobiliare cinese possa subire un ulteriore inasprimento della regolamentazione già rigida cui è sottoposto.

31-mar-2021 - Wenli Zheng, Regional Portfolio Manager,

Focus on China's Future Winners Early in their Cycle

Our aim is to identify outlier companies, beyond the widely owned mega-cap stocks, that potentially offer durable growth that can compound over multiple years, accelerating growth from a new product or industry cycle, or special situation opportunities, as we look beyond short-term challenges to the longer-term prospects of the company. Simply put, we aim to invest in China's future winners early in their cycle.

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As a result of this bottom-up stock selection, the fund's largest overweight positions are in the industrials and business services and consumer discretionary sectors. Conversely, the biggest sector underweights are in financials and communication services.

Industrials and Business Services

We are significantly overweight industrials and business services with positions across a wide variety of areas. Here, we have unearthed what we believe to be good business models and/or opportunities in industries with strong growth tailwinds.

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We bought Shenzhen Megmeet Electrical, a supplier of industrial power sources, industrial automation products, and electric control products for smart home appliances. The firm has accelerated its production capacity expansion, R&D, and team building with the aim of realizing its 2025 revenue target of RMB 12 billion. We believe Megmeet new product launches are the start of a new chapter of long-term and steady growth for the company.
We bought Arctech Solar, which we view as a play on the solar theme as well as a penetration story. The company is a market leader in its field in China and one of the world's leading manufacturers and solution providers of solar tracking and racking systems. In our view, its differentiated technology and pricing power also gives the company lots of room to increase its penetration in the solar space.
We initiated a position in Yangzijiang Shipbuilding. We believe this is a value play on a global demand recovery; both shipping orders as well as the current idle fleet ratio are at record lows since the global financial crisis (GFC). Combined with a record-high freight rate, shipping lines could potentially accelerate their replacement processes and start a big order upswing cycle. Meanwhile, we believe the supply side has also improved tremendously after a decade-long consolidation process. With both strong demand and a disciplined supply, we could potentially be looking at one of the longest upswings since the GFC.

Consumer Discretionary

The portfolio has a sizable absolute position in the consumer discretionary sector and is overweight versus the benchmark. We have exposure to companies that we think are well placed to gain from powerful long-term themes, such as educational services and increasing household disposable income. We found some compelling investment opportunities in this space.

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We bought Autel Intelligent Technology as a play on China's automotive aftermarket, which in our view has significant growth potential. The company is a leading supplier in China's high-profitability automotive intelligent diagnosis and detection industry. It launched a new product last year with a higher price point that is proving very popular, and further new product launches with large opportunity sets are anticipated. We also expect increased software revenue given requirements for updates post purchase.
We own a large position in JS Global Lifestyle, a leading producer of small household appliances, and continued to add to our exposure over the quarter. We believe that new product cycles, combined with deleveraging, can drive gains following several years of modest growth.
In contrast, we trimmed our position in Bafang Electric Suzhou, which is a leading manufacturer and distributor of electric bicycle driving components. During the quarter, we took advantage of share price strength to manage our exposure; however, we still find the business attractive long term given increasing penetration of e-bikes globally.

31-ago-2021 - Wenli Zheng, Regional Portfolio Manager,

Nel settore industriale e dei servizi alle imprese, abbiamo venduto la posizione in Arctech Solar dopo che le valutazioni delle società coinvolte nel solare hanno raggiunto nuovi massimi. Questo rimbalzo è scattato in scia al ribadito sostegno del governo all'energia rinnovabile che ha richiamato in massa gli investitori nei settori collegati, percepiti come meno esposti al rischio normativo. Altrove, manteniamo un'alta convinzione nei confronti delle società di gestione immobiliare, che si collocano dal lato giusto del cambiamento contribuendo a rendere la società un luogo migliore in cui vivere.

31-mar-2021 - Wenli Zheng, Regional Portfolio Manager,

We bought Shenzhen Megmeet Electrical, a supplier of industrial power sources, industrial automation products, and electric control products for smart home appliances. The firm has accelerated its production capacity expansion, R&D, and team building with the aim of realizing its 2025 revenue target of RMB 12 billion. We believe Megmeet new product launches are the start of a new chapter of long-term and steady growth for the company.
We bought Arctech Solar, which we view as a play on the solar theme as well as a penetration story. The company is a market leader in its field in China and one of the world's leading manufacturers and solution providers of solar tracking and racking systems. In our view, its differentiated technology and pricing power also gives the company lots of room to increase its penetration in the solar space.
We initiated a position in Yangzijiang Shipbuilding. We believe this is a value play on a global demand recovery; both shipping orders as well as the current idle fleet ratio are at record lows since the global financial crisis (GFC). Combined with a record-high freight rate, shipping lines could potentially accelerate their replacement processes and start a big order upswing cycle. Meanwhile, we believe the supply side has also improved tremendously after a decade-long consolidation process. With both strong demand and a disciplined supply, we could potentially be looking at one of the longest upswings since the GFC.
We bought Autel Intelligent Technology as a play on China's automotive aftermarket, which in our view has significant growth potential. The company is a leading supplier in China's high-profitability automotive intelligent diagnosis and detection industry. It launched a new product last year with a higher price point that is proving very popular, and further new product launches with large opportunity sets are anticipated. We also expect increased software revenue given requirements for updates post purchase.
We own a large position in JS Global Lifestyle, a leading producer of small household appliances, and continued to add to our exposure over the quarter. We believe that new product cycles, combined with deleveraging, can drive gains following several years of modest growth.
In contrast, we trimmed our position in Bafang Electric Suzhou, which is a leading manufacturer and distributor of electric bicycle driving components. During the quarter, we took advantage of share price strength to manage our exposure; however, we still find the business attractive long term given increasing penetration of e-bikes globally.

31-mar-2021 - Wenli Zheng, Regional Portfolio Manager,

Country Garden Services (CGS), one of China's leading property management companies, posted robust gains. The company reported a strong set of 2020 results and, more importantly, it provided a very bullish 2025 sales target that, in our view, implies�a six-fold increase in net profit over the next five years.
Shares of SITC International, a shipping logistics company, also made substantial returns. The company has benefited from favorable supply dynamics, which was reflected in solid 2020 earnings while the dividend payout surprised on the upside. We believe the company is run by a very high-quality management team with an excellent track record of capital allocation.
NARI Technology, a leading electrical equipment company that produces digital equipment that is used in China's grid, was another area of strength for the portfolio. During the review period, China's state-controlled power network operator the State Grid released a plan to achieve peak emissions and carbon neutrality. This confirmed our investment thesis, namely that Nari will be a main beneficiary as China shifts its focus to environmental efficiency.
However, those positives were offset to an extent by our position in Beijing Enterprise Urban Resources, an integrated waste management solution provider. The company listed last year amid high market expectations; however, preannounced 2020 numbers were below expectations and the stock price underdelivered.
Shares of JS Global Lifestyle, which specializes in small appliances such as blenders, rice cookers, and soymilk makers, rose significantly over the quarter. The company reported consensus-beating results, which were attributed to strong product momentum as well as optimization of the group's operational and supply chain efficiency.
Vipshop, which is the largest online apparel inventory clearance platform in China using a flash-sale model, added further value. An effective merchandising strategy and a steady expansion in its customer base have supported revenue growth, demonstrated by a solid set of fourth-quarter results.
Our position in HOPE Education, a leading private higher education provider in China, also boosted performance amid news of the company's commitment to ongoing mergers and acquisitions (M&A) activity. During the quarter, the company raised capital, earmarked for six domestic schools. HOPE's track record of acquisitions has so far been solid and prudent, in our view, as it tends to buy schools with smaller scale but with higher growth potential.
Shares of STAAR Surgical, the industry leader of the emerging refractive lens marketplace, registered solid gains. Myopia is a common issue in China. The mainstream method of treating it is with laser, but this is irreversible, while STAAR uses a reversible procedure, which is very popular in the country. During the review period, the company reported a good set of fourth-quarter results, which showed that its business has rebounded strongly from its initial COVID slump, with strength across all major markets.
Qingdao Haier Biomedical added further value. The company is independently run despite being part of the Haier Group state-owned enterprise, but it is benefiting from Haier Group's technology; for example, storage equipment for medical use. Qingdao Haier Biomedical is one of the few companies producing equipment for transporting the Pfizer vaccine.
However, our position in Shandong Weigao Group Medical Polymer, a medical device company, worked against the portfolio's performance. Pricing pressures for various business segments as well as industrywide concerns on price cuts held back the share price. However, the company continues to produce robust results, and we believe that its earnings will remain resilient in the face of potential policy changes given its diversified product offering.
Shares of Beijing Shunxin Agriculture, a market leader in China's attractive mass-market bajiu segment, fell sharply over the review period. Its shares pulled back, along with the white liquor industry, following strong share price performance. However, we still like the company as its distillery announced price adjustment plans; we think that the stock will benefit from this while still having room for further price hikes amid a recovery in consumption.
Despite reporting a good set of results, an improvement in its product mix, and profit delivery in a tough year, shares of Tsingtao Brewery fell over the review period. Instead, investors appeared to focus more on the risks from rising package costs and competition from other premium beer producers. We still like this leading Chinese brewery, which is a value play on the beer industry profit pool expansion thesis.

Fonte dei dati per l’indice di riferimento: MSCI. MSCI non fornisce garanzie o dichiarazioni, espresse o implicite, e non si assume alcuna responsabilità riguardo ai dati MSCI qui riportati. Non è consentito redistribuire o utilizzare ulteriormente i dati MSCI come base per altri indici, titoli o prodotti finanziari. La presente relazione non è stata approvata, rivista o prodotta da MSCI.

Fonte per la performance: T. Rowe Price. La performance del Fondo è calcolata utilizzando il NAV ufficiale con dividendi reinvestiti, se del caso. Il valore di un investimento e qualunque reddito da esso derivante possono salire o scendere. Gli investitori potrebbero non recuperare il capitale investito. Tale capitale sarà interessato dalle variazioni del tasso di cambio tra la valuta di base del fondo e la valuta di sottoscrizione, se diversa. Gli oneri di vendita (fino a un massimo del 5% per la Classe A), le tasse e gli altri costi applicati a livello locale non sono stati dedotti e, se applicabili, ridurranno le cifre della performance. La performance pregressa non è un indicatore affidabile dei risultati futuri. Gli indici mostrati non sono benchmark formali. Sono riportati unicamente a scopo comparativo.

I dati della performance giornaliera si basano sull’ultimo NAV disponibile.

I Fondi sono comparti di T. Rowe Price Funds SICAV, societá d'investimento lussemburghese a capitale variabile, registrata presso la Commission de Survillance du Secteur Financier e qualificata come "OICVM". Obiettivi, politiche d'investimento e rischi sono dettagliati nel prospetto disponibile con il documento contenente le informazioni chiave (KID) in inglese e italiano, assieme agli atti di incorporazione, statuti e relazioni annuali e semestrali (insieme "Documenti del Fondo"). Ogni decisione d'investimento va presa sulla base dei Documenti del Fondo disponibili gratuitamente richiedendoli al rappresentante locale, all'agente locale per le informazioni/ i pagamenti, ai distributori autorizzati. Questi, insieme alla sintesi dei diritti degli investitori in Inglese, sono disponibili anche via www. troweprice.com. La Società di gestione si riserva il diritto di porre fine agli accordi di marketing.

Il fondo è soggetto a rischio di alta volatilità

I titoli specifici individuati e descritti in questa relazione non rappresentano tutti i titoli acquistati, venduti o raccomandati per il comparto Sicav e non è possibile presumere che i titoli individuati e trattati si siano dimostrati o si dimostreranno redditizi.

Si può reperire, a titolo gratuito e su richiesta presso la sede legale della Società, una lista completa delle Classi di Azioni attualmente emesse, oltre alle categorie In Distribuzione, Coperte e In Accumulo.

Focus on China's Future Winners Early in their Cycle

Industrials and Business Services

Consumer Discretionary

Rischi

Investitore tipo