Emerging Markets Corporate Bond 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

Exogenous risks remain a cause for caution. Additionally, idiosyncratic risks in a few markets combined with a global central bank rate hiking cycle have led to a challenging investment climate. However, recent volatility has moved absolute valuations to below historical averages. Corporate fundamentals and credit metrics are generally healthy, but likely at peak levels as supply shortages and rising input prices are pressuring margins in places.

We expect overall market sentiment to be challenged in the near term. Global growth has continued to be disappointing; however, there is a degree of optimism that China's recovery will gain more traction in the coming months. Despite the weak economic backdrop, some corporates appear to be managing the macro issues well from an operational perspective and balance sheets have benefited from a period of deleveraging. The absence of near-term maturities should also keep default rates contained over the near term. We will be actively monitoring the 2Q2022 earnings season to further assess how companies are managing the challenging climate.

Growth recoveries are slowing in some markets as inflation pressures build and the monetary policy trajectory is now less accommodative for growth. However, EM debt continues to offer a substantial yield premium and broadly sound fundamentals, making the asset class compelling on a risk-adjusted basis relative to other credit sectors.

The fund maintained above-average exposure to investment-grade markets such as Mexico and Chile. The portfolio has reduced exposure to the more mainstream high yield markets of Turkey and South Africa due to deteriorating credit profiles and institutional quality and are underweight fragile frontier markets such as Nigeria and Zambia.

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As always, our process is centered around bottom-up, fundamental research and effective security selection. This approach will become increasingly important as the market environment becomes less beta-driven and fundamentals come back to the fore.

Strategy

Fund Summary

We take a highly active approach that is largely benchmark-agnostic. We apply intensive, local bottom-up analysis to identify pricing inefficiencies and avoid risks others might not be able to spot. We aim to identify credit rating upgrade candidates, offering an attractive spread relative to similarly rated peers. 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.

OUR VIEWS ON EMERGING MARKETS

Performance - Net of Fees

Past performance is not a reliable indicator of future performance.

31-Oct-2024 - Siby Thomas, Co-Portfolio Manager,

Emerging markets debt declined in October as global yields rose sharply. Within the portfolio, our positioning in the consumer sector contributed to relative returns, particularly our holdings in Ukraine. Also in the sector, our underweight exposure to Brazil benefitted amid regional weakness. Additionally, our positioning in the technology, media and telecommunications sector added value, driven by Mauritius-based names in telecommunications. Security selection in the real estate sector added further value, led by our holdings in Indonesia and Hong Kong. However, a lack of exposure to financial holdings in China, which benefitted after the country’s central bank injected liquidity in the banking system, held back results. Our credit selection in the oil and gas sector was also detrimental, particularly in Qatar and Brazil.

31-Jan-2024 - Samy Muaddi, Portfolio Manager,

As liquidity remained challenged, we made modest changes over the month. The portfolio remained underweight the cyclical financials and consumer sectors relative to the benchmark while preferring domestically focused sectors such as technology, media, and telecom(TMT) and utilities. We added to TMT holdings in Oman and India as well as oil and gas names in Colombia and Kazakhstan. We trimmed our holdings in metals and mining credits in Brazil and Peru as well as utilities names in Israel.

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