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    June 27, 2013

    The managers of T. Rowe Price's international equity funds recently offered their outlooks for global investing in shareholder letters covering the six months ended April 30, 2013. The following excerpts are highlights from the complete shareholder reports, which are now available online.

    Leigh Innes

    Emerging markets have been underperforming developed markets thus far in 2013, in part because of weaker commodity prices and emerging markets currencies. Economic growth in developed Europe remains weak, exacerbated by fiscal austerity. The potential for another flare-up in the eurozone's sovereign debt crisis will continue to act as an overhang on emerging Europe, especially central Eastern European markets with the strongest economic links to eurozone members.

    Gonzalo Pangaro
    Gonzalo Pángaro, Emerging Markets Stock Fund

    The growth of a middle class and the ensuing rise in domestic demand are a source of huge economic potential in the developing world. While developed markets may continue to outperform emerging markets in the near term, we are optimistic that growth in emerging markets is still on track to outpace that of developed markets over the long haul.

    Dean Tenerelli
    Dean Tenerelli, European Stock Fund

    Although the macroeconomic environment in Europe remains challenging, we are optimistic that a gradual economic recovery will begin to unfold over the next year. Several countries have instituted reforms to address structural economic disadvantages, including much needed labor market reforms and other market adjustments, especially in countries such as Spain and Ireland. As a result, current account imbalances are being addressed and surpluses have been achieved in some cases.

    Susanta Mazumdar
    Susanta Mazumdar, Global Infrastructure Fund

    We are seeking companies that feature steady and sustainable dividend growth and moderate appreciation potential. While the markets and investment environment remain uncertain, we will continue to leverage our independent global research platform to uncover unique opportunities.

    Scott Berg

    Many of the larger emerging markets have struggled with slowing growth and increased inflation. However, we believe they are taking steps to move toward consumption-driven economies that will result in a stronger middle class.

    David Eiswert
    David Eiswert, Global Stock Fund

    Developed market equities posted strong returns despite modest U.S. economic growth and European stagnation. While this means equity valuations are somewhat less attractive than before, we remain optimistic going forward.

    Justin Thomson

    It is just too early to tell whether markets are going to have the seasonal swoon associated with a growth lull or pause. Meanwhile markets have climbed the wall of worry and equity risk premiums have fallen (i.e., valuations have increased) but are still supportive.

    Jonathan H.W. Matthews
    Jonathan H.W. Matthews, International Growth & Income

    We are reasonably positive on the market's prospects in the coming months, as we expect this pattern of slow but continued healing in the global economy to continue. Markets are also likely to remain volatile, however, as periodic setbacks alarm investors.

    Bob Smith

    Inflation may become an issue at some point due to the loose monetary policies pursued by many central banks, but it is unlikely to become a problem for many months. We think that in the not-too-distant future optimism will spread, and investors will begin to feel more comfortable about investing in emerging markets and companies that have the potential to generate above-average cash flow growth.

    Campbell Gunn
    Campbell Gunn, Japan Fund

    Investing in Japan continues to involve unique economic, corporate, and political factors—issues requiring a degree of comfort but, more importantly, a deep understanding from investors who have largely ignored this market in recent years. The magnitude of any future returns will be dependent not only on policy efficacy, but also external growth factors, especially in Europe and the U.S.

    Jose Costa Buck
    José Costa Buck, Latin America Fund

    Despite the recent underperformance of emerging markets stocks, we feel strongly that the reasons for investing in the asset class are still intact. Growing urbanization, consumption, and upward mobility are long-term secular trends that will drive strong and sustainable growth in Latin America and other emerging markets for many years.

    Anh Lu

    Many businesses in the region are still in a capacity-readjustment process in response to slower revenue growth, which is dampening their profitability. In this environment, we are acutely focused on seeking the best growth opportunities in Asia and will continue to take advantage of market declines to buy high-quality companies at attractive prices.

    Ray Mills

    Loose monetary policies have provided a welcome boost to investor sentiment but, in many instances, have yet to spur significant economic growth. Profound challenges loom as leaders must decide how and when they will ultimately unwind their stimulative monetary policies without breaking their budgets, economies, or financial markets.

    Funds that invest overseas generally carry more risks than funds that invest strictly in U.S. assets, including currency risk, political risk, and geographic risk. These risks are expected to be greater for any investments in emerging markets.

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