Frontier Markets 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 believe frontier markets have a natural place in an investor's global portfolio considering the long-term fundamentals and low correlation to other equity indexes. The macro fundamentals and demographics in many frontier markets today are favorable, and these economies have the potential to grow much faster than those in the developed and emerging markets universes. While the current global crisis brings investment opportunities, and the long-term growth outlook of many companies remains underpriced, we acknowledge that there will be individual winners and losers. Careful stock picking is therefore key and forms the core of everything we pursue.

In frontier Asia, we remain optimistic on the outlook for Vietnam. Following a challenging period with the coronavirus omicron variant and restrictive containment measures, we are pleased to see a catch-up in the vaccination rate and improving consumer sentiment on the ground. We believe that the country offers a very attractive long-term opportunity and find many compelling bottom-up ideas across sectors. Our holdings are focused on those companies that we believe are most able to execute well and benefit from the economy's strong structural growth potential.

We have become more optimistic on the outlook for Bangladesh following the loan program request it is working on with the IMF. This is due to the effects of rising inflation and declining foreign reserves on the country. We believe that the economy is well positioned for growth, and we are able to find companies with favorable valuations.

In frontier emerging market Pakistan, we are keeping a close eye on macroeconomics and geopolitics, particularly given the country's twin deficits, rising inflation, and currency depreciation. However, the government has agreed to tough adjustments in order to secure a USD 6 billion bailout package from the IMF. We focus on high-conviction ideas with strong bottom-up fundamentals, which are predominantly export businesses (meaning that they, in fact, benefit from currency weakness).

In Africa, Nigeria remains uninvestable despite the oil price, largely due to the strict capital controls that are in place. The equity market in Kenya is dominated by Safaricom, a large fintech provider, which was able to grow its services before and during the pandemic. We are concerned about the authorities' management of the economy and the currency.

In frontier emerging market Egypt, we are worried about the near term given the global forces at play. The economy is particularly vulnerable to the impacts of Russia's invasion of Ukraine. However, support from the IMF and select Gulf states should help the country to weather this challenging period.

Strategy

Fund Summary

Our research seeks to identify companies with superior and sustainable earnings growth at valuations that do not fully reflect that growth. We are constantly on the ground meeting with company management teams and industry experts in local frontier countries to uncover the long-term winners. The manager is not constrained by the fund's benchmark, which is used for performance comparison purposes only.

OUR VIEWS ON FRONTIER MARKETS

Performance - Net of Fees

Past performance is not a reliable indicator of future performance.

30-Nov-2024 - Johannes Loefstrand, Portfolio Manager,

Frontier equities fell modestly in US dollar terms in November, underperforming developed but outperforming their emerging market peers. At a global level, equity markets were extremely volatile following the results of the US election in which Donald Trump won a second non-consecutive presidential term. Vietnamese stocks declined along with most other Asian markets. Investor sentiment was dented by the incoming Trump administration’s threat of harsh tariffs and concerns that growth in China could slow further and affect the wider region. At the portfolio level, information technology (IT) had the most positive impact, thanks to both our choice of securities and overweight allocation. Shares of a Vietnam-based IT services provider rose as investors were encouraged by its latest update in which management noted it was anticipating a stronger recovery in the US market in 2025, driven by increased spending under a Trump presidency. Conversely, within financials, our holding in a Vietnamese bank sold off in November, with investors focusing on the recent increase in the bank’s non-performing loan ratio and reduced risk sentiment in the Vietnamese market.

31-Jan-2024 - Johannes Loefstrand, Portfolio Manager,

As of the end of January, the portfolio’s main overweight sector allocations relative to the benchmark were in information technology, consumer discretionary and financials while the most significant underweight sector allocations were to real estate, utilities, industrials and business services, and health care. Within the consumer discretionary space, we recently initiated a position in a university operator with its operations focused in Mexico and Peru. We believe this is a well-managed company that operates in countries of limited education regulation and limited state support.

31-Jan-2024 - Johannes Loefstrand, Portfolio Manager,

We recently undertook a research trip to Argentina. Within our macroeconomic framework, Argentina is the archetypal ‘Unanchored Frontier’ market, despite its rich human capital and natural resources. Each of the three economic anchors are effectively inexistent: the fiscal deficit is out of balance, national debt levels are unsustainable, and many of country’s key institutions are tainted by vested interests and corruption. It will be very difficult to transform the economy and bureaucracy in the medium term. We remain cautious; our two investments in this market are both commodity exporters and therefore less correlated with Argentine politics and economics than average.

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.

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Risks

Typical Investor