Emerging Markets Equity Fund

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Overview

Manager's Outlook

We believe that economic growth across many developing markets could continue to be higher than in the developed world soon, with some signs that this gap, which narrowed for five years through 2015, is turning wider. We feel that those countries that push forward with reforms could do well, while countries that do not may struggle. Our view is that we are likely to see a much more uneven world going forward, with less correlation and greater divergence in performance among countries and in stocks within those countries. We will remain focused on quality companies, as we continue to believe that those leading firms will weather the tough environment and may, in fact, improve their competitive positioning.

Near-term risks include an escalation of trade war rhetoric or a worse-than-expected slowdown in China or a breakdown in its financial system or an unexpected bout of risk aversion due to geopolitical events. A stronger-than-expected U.S. dollar could also pose a risk for these markets. However, we believe that investor concerns may be overdone. The extent of the Chinese growth slowdown remains a key question, but we think policymakers have the tools to manage the transition and slowdown that is occurring in China.

In our opinion, the impact that higher U.S. interest rates will have on emerging markets may turn out to be less significant than investors fear. Higher interest rates are reviving the concerns about lower capital flows (such as foreign direct investment) and weaker currencies within these emerging market countries. But broadly speaking, we think that most emerging market countries are in better shape to weather this volatility, with improved current account positions; higher foreign exchange reserves; higher real interest rates; and currencies that, in most cases, have fallen over the past several years.

Overall, we believe the environment may remain complex, but, in our view, this could provide a good opportunity for active investors to take advantage of valuation anomalies. The emerging consumer remains a powerful force, in our view, and could, we believe, continue to drive strong growth in a variety of industries and companies, including retail, banking, technology, and the internet. With investors skeptical, valuations attractive, and fundamentals bottoming, we believe the environment appears positive for emerging markets equities and ripe for stock picking.

Strategy

Fund Summary

We have a bottom-up, long-term approach, driven by fundamental research. Our company research focuses on franchise strength, management team quality, free cash flow, and financing structure. Corporate governance is strongly embedded within our investment process, as is the consideration of critical macroeconomic and political factors. 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.

Investment Association Sector:

Global Emerging Markets

OUR VIEWS ON EMERGING MARKETS

31-Jan-2024 - Eric Moffett, Portfolio Manager,

Consumer discretionary and consumer staples are areas where we have identified several high-quality investment opportunities. We have a large allocation to the latter where we believe our holdings are well placed to benefit from a growing middle class in the emerging world. These companies have the potential to achieve relatively stable levels of earnings growth over the next few years, in our view. In contrast, we have relative underweight positions in the materials and utilities sectors, where we have typically not found many companies with the durable, longer-term, earnings characteristics that we seek.

31-Jan-2024 - Eric Moffett, Portfolio Manager,

We have a relatively overweight position in Brazil where we have found a range of investment opportunities that are trading at attractive valuations. In our view, the growth outlook for the country this year remains positive, and we continue to find areas of the market that we believe will be beneficiaries of its robust macroeconomic backdrop. On the other hand, we are more cautious about Taiwan, which we believe could stay weak in the near term as it is heavily exposed to global trade.

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.

This product is based overseas and is not subject to UK sustainable investment labelling and disclosure requirements.

Risks

Typical Investor

Commentary for