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Emerging Markets: On the Road to Recovery

We believe emerging market (EM) fundamentals remain positive. We continue to see a reversal in the negative rhetoric from 2018 and stabilisation in many markets. The Fed has taken a more dovish tone this year, compared to last year. While US-China trade relations remain a major tail risk, we believe the current market environment provides a particularly attractive entry point for investors.

With valuations at attractive levels, is it time to consider emerging markets?

Chetan Sehgal, Senior Managing Director, and Director of Portfolio Management of Franklin Templeton Emerging Markets Equity argues the case for emerging markets, given where fundamentals stand.

Why Consider Emerging Markets?

1. Invest in the World’s Future Giants

Emerging markets are expected to contribute 62.7% of global growth by 2023. It was only 16 years ago when these markets accounted for 50% of global growth in 2007.
  • Emerging Markets
  • Developed Markets

2. Attractive Valuations

Emerging markets are currently trading at a significant discount to developed markets, providing long-term investors with an attractive investment opportunity.

Price-to-Earnings Ratio Comparisons2

3. Economic Reforms Well Underway

Many emerging markets have embarked on structural reform initiatives, which are critical to economic growth and development. Here are some recent ‘growth-friendly’ events in 5 emerging markets.

CHINA

Deleveraging efforts, supply-side and SOE reforms, liberalization of economy to facilitate economic competitiveness.

SOUTH KOREA

Measures to improve corporate governance, especially in Chaebols, to ensure more inclusive and sustainable growth. Policies to enhance dynamism in SMEs and boost entrepreneurship.

INDIA

Structural reforms in key areas like GST, bankruptcy law, natural resource auction, directed subsidies have been implemented. Ongoing efforts to fight corruption and formalize the economy.

INDONESIA

Focus on infrastructure development, fiscal reform and improving the business climate.

PHILIPPINES

Acceleration of pace of economic reforms, including tax reforms, market liberalization and significant infrastructure spending.

4. China’s ‘New Economy’

Centering on technology and consumption, China is a force to reckon with. With the expansion of its middle class and rising affluence, growing domestic consumer demand is expected to contribute to emerging markets’ resilience in the face of external headwinds.

5. Turning the Corner

Emerging markets equities have historically bounced back from external shocks, and sometimes within a relatively short time frame, displaying resilience through the years. Despite the late 2018 volatility, emerging market equities performance have taken a turn for the better at the beginning of 2019.

Long-term Outperformance of EM stocks3

Various MSCI Indices
Indexed to 100, Total Return, USD
31 Dec 1987 - 31 Mar 2019

Scroll horizontally to view the chart
  • MSCI Emerging Markets Index
  • MSCI World Index
  • MSCI AC Asia ex-Japan Index

Our Range of Emerging Markets Funds

Key Investment Themes

DOMESTIC CONSUMPTION PLAY


Focusing on companies that are beneficiaries of domestic consumption-driven economies.

STRONG FUNDAMENTALS


Identifying companies with prudent financial policies, strong balance sheets and sound corporate governance that are likely to succeed in the long term.

ATTRACTIVE VALUATION


Seeking mispriced stocks in under-researched sectors.

Templeton Emerging Markets Fund

An equity fund that invests in well-researched, quality companies within global emerging markets across market capitalisations, with a focus in consumerism and technology

Overall Morningstar RatingTM 4

FACTSHEET


Templeton Emerging Markets Smaller Companies Fund

An equity fund that invests in smaller, well-governed companies within global emerging markets with strong cash flow and high return-on-equity

Overall Morningstar RatingTM 4

FACTSHEET


Templeton Emerging Markets Balanced Fund

One-stop solution for global emerging markets equity and fixed income

Overall Morningstar RatingTM 4

FACTSHEET

Useful Resources

Emerging Markets Come of Age

Driven by the pursuit of a better life, emerging markets are not what they used to be. Yet, outdated perceptions about EMs persist. Read about the three new realities in EM investing.

Read More

China's Century?
The Economic Giant's Next Act

After years of heady growth, China is now at a crosswoads, Read more about our outlook on China, as economic growth slows and de-risking becomes a priority.

Read More

Why Franklin Templeton For Emerging Markets Equity?

DELIVERING EXCELLENCE FOR OVER
70
YEARS

As Franklin Templeton's global centre for emerging markets investment management, you're able to draw on our specialized investment talent, global reach and robust risk management, right here in Singapore.
Comprising of highly experienced investment professionals, the emerging markets team have not only been closely monitoring the development of Emerging Markets but have also been part of its unfolding since the early 2000s.
Our strong local presence in global emerging countries represents a strategic advantage over other managers, along with established relationships with local governments, corporations, industry consultants and brokerage firms that put us in a prime position for advocating investors' best interest.
AMERICAS
4 Locations

BUENOS AIRES

SÃO PAULO

RIO DE JANEIRO

NEW YORK

EUROPE, MIDDLE EAST & AFRICA
8 Locations

VIENNA

FRANKFURT

WARSAW

BUCHAREST

CAPE TOWN

ISTANBUL

DUBAI

EDINBURGH

ASIA-PACIFIC
10 Locations

KUALA LUMPUR

SEOUL

SHANGHAI

SINGAPORE

HYDERABAD

BANGKOK

HO CHIN MINH CITY

HONG KONG

CHENNAI

MUMBAI

Investment Approach

STRONG TEAM WITH IN-DEPTH LOCAL KNOWLEDGE


20+
Offices globally


80+
Analysts conducting bottom-up research

HIGH-CONVICTION INVESTMENT APPROACH


Seeks companies at deep discounts to intrinsic value


Comprehensive strategies backed by thorough research

INTEGRATED RESEARCH


In-depth country and sector analysis and reporting

VALUE ORIENTATION WITH LONG-TERM HORIZON


Attractive portfolio valuation


Minimise portfolio turnover and trading cost

Templeton Emerging Markets Fund, Templeton Emerging Markets Smaller Companies Fund and Templeton Emerging Markets Balanced Fund are sub-funds of Franklin Templeton Investment Funds ("FTIF"), a Luxembourg registered SICAV.

What Are The Key Risks?

Templeton Emerging Markets Fund
The value of shares in the Fund and income received from it can go down as well as up and investors may not get back the full amount invested. Performance may also be affected by currency fluctuations. Currency fluctuations may affect the value of overseas investments. The Fund invests mainly in the equity securities of emerging markets around the world, which have historically been subject to significant price movements, frequently to a greater extent than equity markets globally. As a result, the performance of the Fund can fluctuate considerably over time.

Other significant risks include: emerging markets risk, currency risk, liquidity risk, operational risk, Shanghai-Hong Kong Stock Connect risk. For full details of all of the risks applicable to this Fund, please refer to the "Risk Considerations" section of the Fund in the current prospectus of Franklin Templeton Investment Funds.

Templeton Emerging Markets Smaller Companies Fund
The value of shares in the Fund and income received from it can go down as well as up and investors may not get back the full amount invested. Performance may also be affected by currency fluctuations. Currency fluctuations may affect the value of overseas investments. The Fund invests mainly in the equity securities of smaller companies in emerging markets. Such securities have historically been subject to significant price movements, frequently to a greater extent than equity markets globally. As a result, the performance of the Fund can fluctuate considerably over time.

Other significant risks include: currency risk, emerging markets risk, liquidity risk, operational risk, Shanghai-Hong Kong Stock Connect risk. For full details of all of the risks applicable to this Fund, please refer to the "Risk Considerations" section of the Fund in the current prospectus of Franklin Templeton Investment Funds.

Templeton Emerging Markets Balanced Fund
The value of shares in the Fund and income received from it can go down as well as up and investors may not get back the full amount invested. Performance may also be affected by currency fluctuations. Currency fluctuations may affect the value of overseas investments. The Fund invests mainly in debt and equity securities issued by entities located in emerging countries. Such securities have historically been subject to price movements, generally due to interest rates, market factors or movements in the equity and bond markets. As a result, the performance of the Fund can fluctuate considerably over time.

Other significant risks include: credit risk, derivative risk, emerging markets risk, liquidity risk, Shanghai-Hong Kong Stock Connect risk. For full details of all of the risks applicable to this Fund, please refer to the "Risk Considerations" section of the Fund in the current prospectus of Franklin Templeton Investment Funds.