Emerging Local Markets 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

Strategy

Fund Summary

Our approach is to leverage our in-house global fixed income team’s views to form a baseline for emerging market debt. We then carry out fundamental research, including independent country risk assessments across more than 60 countries. We formulate short- and medium-term forecasts across the yield curve for nominal bonds, inflation-linked bonds, and currencies. The promotion of environmental and/or social characteristics is achieved through the fund's commitment to maintain at least 50% of the value of its portfolio invested in issuers and/or securities that are rated as ‘Green’ by the T. Rowe Price proprietary Responsible Investor Indicator Model (RIIM). 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.

Global Emerging Markets

OUR VIEWS ON EMERGING MARKETS

30-Jun-2022 - Andrew Keirle, Portfolio Manager,

The portfolio's duration positioning vacillated during the quarter, beginning with an underweight position and ultimately ending the quarter in a neutral stance. We reduced our duration overweight to Latin America and moved further underweight Asia, while increasing European duration on improved valuations. Elsewhere, we remained constructive on EM FX and ended the period overweight emerging Europe, Asia, and Latin America, mostly based on relative value. These positions remain principally funded by a basket of developed market currencies, most notably the U.S. dollar and euro.

Bond Allocation

We moved further underweight in Asia, primarily by shifting to an underweight allocation to China, as recurring lockdowns to contain the coronavirus could jeopardize growth. We slightly narrowed our underweight to Malaysia following the country's recent increased position in the benchmark.
Against the backdrop of stretched valuations, concerns about inflation, and risks of central bank hawkishness leading to yields rising, we remained underweight lower-yielding EM and held defensive short positions in core markets.
Amid stretched valuations, we trimmed our exposure to inflation-linked bonds in Mexico.
We reduced our underweight to Central and Eastern Europe given our constructive growth outlook for the region. We added to Poland, Hungary, and Romania amid solid growth. Hungary and Romania are farther along in their credit-hiking cycle, and we expect inflation to moderate over the medium term, which could lead to a lower terminal policy rate relative to market pricing.
We also retained an overall overweight exposure to Latin America mostly based on relative value. However, we reduced our overweight to Mexico due to its close ties to the United States' economy and an increasingly hawkish Fed.
The depth of our research process allows us to evaluate markets that are outside the benchmark in our search for value. Accordingly, we held an off-benchmark position in Zambia and Ukraine and a short off-benchmark position in India.

Currency Selection

We increased our short U.S. dollar position during the quarter as stretched valuations seemed likely to limit additional gains and increased the attractiveness of EM FX.
We also ended the quarter broadly overweight currencies in emerging Europe, mostly due to our constructive growth outlook on the region. However, this was reduced as we moved underweight Serbia due to inflationary pressures and unattractive carry prospects.
We also increased our overweight Asia through the quarter, primarily by adding exposure to Indonesia and Malaysia. We also rotated some Chinese exposure to offshore renminbi due to technical factors.
We also reduced our underweight to Latin American currencies mostly due to attractive valuations and carry, particularly in Colombia, where recent weakness and rate hikes increased the peso's attractiveness. However, we moved underweight the Peruvian sol, and decreased the Brazilian real and Chilean peso amid falling metal prices.
The breadth of our research process also allows us to evaluate currencies outside the benchmark where we see attractive opportunities. Accordingly, we held off-benchmark currency exposures to Zambia, Ukraine, and Kazakhstan; however, we eliminated the latter following recent recoveries.

Team

Andrew Keirle,
Portfolio Manager

Andrew Keirle is a portfolio manager of the Emerging Markets Local Currency Bond Strategy in the Fixed Income Division at T. Rowe Price.

Portfolio Manager since

2010

Years at
T. Rowe Price

Years investment experience

Michael Ganske,
Portfolio Specialist

Michael Ganske is a fixed income portfolio specialist for T. Rowe Price. He is a member of the Global Fixed Income team, supporting our emerging markets debt strategies, which includes hard currency- and local currency-denominated sovereign and corporate debt. He represents the portfolio management team, presenting strategies and market outlooks in meetings and conferences.

Years at T. Rowe Price

Years investment experience

Benjamin Robins,
Portfolio Specialist

Ben Robins is a fixed income portfolio specialist. He is a member of the Global Fixed Income team, supporting our emerging market debt strategies.

Years at T. Rowe Price

Years investment experience

Indicative Benchmark Data Source: JP Morgan. Information has been obtained from sources believed to be reliable but J.P. Morgan does not warrant its completeness or accuracy. The index is used with permission. The Index may not be copied, used, or distributed without J.P. Morgan’s prior written approval. Copyright © 2022, J.P. Morgan Chase & Co. All rights reserved.

Past performance is not a reliable indicator of future performance.

Source for performance: T. Rowe Price. Fund performance is calculated using the official NAV with dividends reinvested, if any. The value of an investment and any income from it can go down as well as up. Investors may get back less than the amount invested. It will be affected by changes in the exchange rate between the base currency of the fund and the subscription currency, if different. Sales charges (up to a maximum of 5% for the A Class), taxes and other locally applied costs have not been deducted and if applicable, they will reduce the performance figures.

Emerging Local Markets Bond

Effective 1 January 2011, the benchmark was changed to J. P. Morgan Government Bond Index - Emerging Markets Global Diversified Index. Prior to 1 January 2011, the benchmark was the J. P. Morgan Government Bond Index - Emerging Markets Broad Diversified Index. The benchmark change was made because the portfolio manager viewed the new benchmark to be a better representation of the investment strategy of the sub-fund. Historical benchmark representations have not been restated.

Daily performance data is based on the latest available NAV.

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.

Please note that the Fund typically has a risk of high volatility.

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.

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.

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Citywire Data Source: Citywire – where the fund manager is rated by Citywire, the rating is based on the manager’s 3-year risk adjusted performance. For further information on ratings methodology, please visit www.aboutcitywire.com.

Bond Allocation

Currency Selection

Risks

Typical Investor

Commentary for