Best in Class: T. Rowe Price Asian Opportunities Equity
Forget Black Friday – did you know that the world’s biggest 24-hour online shopping event took place earlier this month?
The brainchild of students from Nanjing University, Singles’ Day in China began as an anti-Valentine’s Day holiday in 1993 - but it really gained traction in 2009 as Alibaba adopted the day and turned it into the massive online sales event it has become.
Singles' Day always falls on November 11 because the date 11/11 represents four ones, or four singles, standing together. The name literally translates as "single sticks holiday."
The numbers behind the event are significantly larger. Up to 3m workers, aided by 4,000 planes and cargo ships, helped prepare for this years’ event.
In 2019, more than 200,000 brands participated from 78 countries. Alibaba reported record sales of $38.4bn gross merchandise volume, a rise of 26 per cent in 2019.
This year, sales reached $74bn - as the impact of the pandemic accelerates the growth of online spending. In the short-term, many Chinese are unable to travel or go on shopping trips and, as a result, there was what has been dubbed as “revenge spending” by consumers.
That’s good news for this week’s Best in Class, which has a 10 per cent holding in Alibaba.
T. Rowe Price Asian Opportunities Equity fund manager Eric Moffett recently added to his positions in giants Tencent and Alibaba, citing the long-term prospects of e-commerce and the internet in China.
Based in Hong Kong, Mr Moffett has managed this fund since launch in May 2014. He has 18 years of investment experience, 11 of which have been with T. Rowe Price. He has a degree in economics from Princeton University and an MBA from Harvard Business School.
The fund specifically targets high-quality businesses that will reliably compound earnings and sustain strong cashflow over time. These companies tend to be established businesses, with leading market positions and good management teams who prioritise shareholder returns.
Eric takes a long-term approach and he and the team travel extensively throughout the region, meeting company management, industry experts and government policymakers, to aid in the search for companies.
An initial quantitative screen focuses on quality and valuation. Then detailed company analysis is undertaken.
The team visits companies to enhance its understanding of its operations. These visits are key to enabling it to make independent judgments about the commitment, skills, and resources the company commands.
Mr Moffett also looks at the industry in which the company operates, analysing its structure and outlook.
Importantly, the team assesses if management cares about shareholders and has high corporate governance standards. Once these high quality compounders have been identified, valuation is assessed. Risk management is embedded within the investment process.
Mr Moffett then constructs a portfolio of 40-70 stocks. Between them, China and Hong Kong account for more than half of the portfolio (53.6 per cent), with the consumer discretionary and consumer staples sectors the fund’s two principal overweight versus its benchmark.
