Asian Opportunities Equity Fund

Capital at risk. Past performance is not a reliable indicator of current or future results and should not be the sole factor of consideration when selecting a product or strategy.

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Overview

Manager's Outlook

We see incrementally positive signs that Asia ex-Japan equities are turning the corner, even as overall investor sentiment remains cautious. Amid concerns about persistent inflation, rising interest rates, and the odds of a recession globally, China's easing of strict COVID lockdowns is a welcome development from our perspective. We expect potentially improving conditions in China to augur well for the region's stock market given the Chinese market's significant weighting.

Importantly, we consider China's countercyclical nature of policymaking to be intact. With the economy under pressure, the government has switched to a pro-growth stance, introducing a series of monetary and fiscal stimulus measures. Among these are lower mortgage rates, which we think reflect the government's bid to stabilize the property sector. Regulatory action in the internet industry has also eased, reinforcing our belief that we are likely past the peak of the regulatory cycle. These moves, combined with China's economic reopening, lead us to expect a steadier path ahead for the economy.

From a valuation standpoint, we believe that Chinese equities have broadly priced in expectations for a weak first half of the year. Across Asia ex-Japan, we see compelling valuations for several companies whose structural growth prospects remain visible to us. We believe that indiscriminate sell-offs create opportunities for long-term investors like us to gain exposure to high-quality companies with solid management teams that care about shareholder returns.

We are monitoring the impact of rising inflation in Asia ex-Japan, even though our portfolio positioning is not centered on a particular view on price trends. Rather, our focus is on company-specific factors, and we continually assess the ability of individual businesses to withstand higher costs or pass them on to their customers. At the macroeconomic level, certain central banks facing stronger price pressures have preemptively pursued monetary tightening, whereas China is in a relatively distinct position where inflation remains modest. In general, we think that the region's economic fundamentals remain healthy, with current and fiscal accounts still looking resilient.

Apart from inflation, other potential market headwinds we are watching out for include material economic slowdowns globally, renewed coronavirus lockdowns in China, and geopolitical instability. We expect market recoveries to be uneven, which we think underscores the importance of active management in positioning for an upturn.

Strategy

Fund Summary

Our Asia-based investment team employs bottom-up, fundamental analysis to identify established companies with leading market positions, characterised by returns-focused capital allocation, and run by good management teams who care about shareholder returns. We believe taking a long-term view can exploit mispricings in the region caused by short-term investing. The promotion of environmental and/or social characteristics is achieved through the fund's commitment to maintain at least 10% of the value of its portfolio invested in Sustainable Investments, as defined by the SFDR. Additionally, we apply a proprietary responsible screen (exclusion list). The manager is not constrained by the fund’s benchmark, which is used for performance comparison purposes only.

Performance - Net of Fees

Past performance is not a reliable indicator of future performance.

30-Jun-2024 - Jihong Min, Portfolio Manager,

Asia ex-Japan equities finished a volatile month higher. Technology-leaning bourses in Taiwan and South Korea advanced, tracking unsteady gains in global stocks linked to artificial intelligence (AI). Meanwhile, lukewarm economic data in China dampened its equity market. Within the portfolio, stock selection in China hindered relative performance. Shares of an industrial automation company fell amid tepid domestic industrial activity. Nonetheless, we expect China’s shrinking labour force to drive automation demand over time and support the company’s earnings growth. Looking across sectors, our choice of communication services stocks hurt. Shares of a Chinese online recruitment firm faced profit-taking pressure following a strong rally. However, we see signs of tightening labour supply that may lead more recruiters to pay for the company’s services. We also view the company as a longer-term market share gainer in a growing industry. In contrast, stock selection and our overweight stance in information technology lifted relative returns. A memory chipmaker’s shares surged as investors eyed AI-fuelled demand for its high-end chips. We like the company’s demonstrated strength in producing chips that power AI and expect it to also benefit from a recovery in the wider chip industry.

31-Jul-2024 - Jihong Min, Portfolio Manager,

Asia ex-Japan equities faltered in July. Technology-heavy bourses in Taiwan and South Korea fell as the global technology stock rally lost momentum, and Chinese equities succumbed to growing economic concerns despite easing monetary policy. Within the portfolio, stock selection in communication services weighed on relative returns. China’s slowing economic momentum clouded the outlook for hiring activity and dampened shares of an online recruitment firm. Nonetheless, we believe the company is uniquely positioned to gain market share over the long run in an underpenetrated industry with significant room for growth. Our stock picks in information technology were another source of relative weakness. Investors’ pullback from names linked to artificial intelligence hurt shares of a semiconductor chip designer, whose sales guidance was also below consensus. We continue to monitor the company’s risk-and-reward profile, assessing its near-term and multiyear prospects against its valuation closely. Conversely, our choice of consumer discretionary stocks helped relative performance. In India, consumer-friendly measures in the government’s budget lifted a motorcycle maker’s shares. We like the exposure that the company offers to recovering motorcycle demand in India, along with upgrades in its product portfolio.

31-Jan-2024 - Jihong Min, Portfolio Manager,

Our biggest absolute country exposure in January was to China, where we turned more underweight against the benchmark. We still see structural growth or cyclical improvement potential in a variety of companies but selectively adjusted our holdings amid the economy’s weaker-than-expected recovery. We sold out of a beer company facing declining sales volumes and a housing developer sensitive to the property market cycle. In India, our next largest absolute market position, we also widened our underweight stance. We sold shares of an Indian private-sector bank as we reassessed its potential for rapid growth without hurting its margins and profitability.

Past performance is not a reliable indicator of future performance.

The Funds are sub-funds of the T. Rowe Price Funds SICAV, a Luxembourg investment company with variable capital which is registered with Commission de Surveillance du Secteur Financier and which qualifies as an undertaking for collective investment in transferable securities (“UCITS”). Full details of the objectives, investment policies and risks are located in the prospectus which is available with the key investor information documents and/or key information document (KID) in English and in an official language of the jurisdictions in which the Funds are registered for public sale, together with the articles of incorporation and the annual and semi-annual reports (together “Fund Documents”). Any decision to invest should be made on the basis of the Fund Documents which are available free of charge from the local representative, local information/paying agent or from authorised distributors. They can also be found along with a summary of investor rights in English at www.troweprice.com. The Management Company reserves the right to terminate marketing arrangements.

Hedged share classes (denoted by 'h') utilise investment techniques to mitigate currency risk between the underlying investment currency(ies) of the fund and the currency of the hedged share class. The costs of doing so will be borne by the share class and there is no guarantee that such hedging will be effective.

Before deciding to invest in the fund, you should read the offering document/prospectus (including its investment objectives, policies and any risk warnings) which are available and may be obtained from any appointed distributors.

The specific securities identified and described in this website do not represent all of the securities purchased, sold, or recommended for the sub-fund and no assumptions should be made that the securities identified and discussed were or will be profitable.

A full list of the currently issued Share Classes including Distributing, Hedged, and Accumulating Categories may be obtained, free of charge and upon request, from the registered office of the Company.

Benchmark: Investors may use the benchmark to compare the fund’s performance. The benchmark has been selected because it is similar to the investment universe used by the investment manager and therefore acts as an appropriate comparator. The investment manager is not constrained by any country, sector and/or individual security weightings relative to the benchmark and has complete freedom to invest in securities that do not form part of the benchmark.

Disclosure on Vendor Indices can be found here.

Risks

Typical Investor