Investing in Emerging Markets - Pentapenta-pco.com/ifmc-zse-2017/prezentacije/WEBSITE_October...

For distributors/dealers use only. The content of the presentation should not be reproduced /distributed to the public without prior approval of Franklin Templeton

Investments.For Professional Investors Only. Not for Distribution to Retail Investors.

Investing in Emerging Markets

Mark Mobius, PhD

Executive Chairman, Templeton Emerging Markets Group


Investments.1

As of June 30, 2017 unless otherwise indicated.

* As of 30th September 2017, preliminary month-end

1. Franklin Resources, Inc. is a global investment management organization operating as Franklin Templeton Investments.

2. Investment professionals include portfolio managers, portfolio managers/analysts, research analysts and traders. Includes individuals that are not employees of Franklin Resources Inc. (FRI) or wholly owned subsidiaries of FRI.

However, these individuals are part of our joint venture or strategic partnership relationships worldwide and are an integral component of our overall research efforts

Franklin Resources:

NYSE Listed under BEN

Asset Under Management*: $753 bn

# of Employees Worldwide: 9,000+

# of Countries with Offices: 30+

# of Countries with Investors: 170+

Changes in Emerging Markets

2


Investments.

Source: MSCI, S&P & IFC, EIU World Bank. See www.franklintempletondatasources.com for additional data provider information.

Investable Emerging Markets in 1987

- 6 markets : Mexico, Hong Kong, Philippines, Thailand, Malaysia and Indonesia

Emerging Markets - 1987

3


Investments.

Source: MSCI, S&P & IFC, EIU World Bank, See www.franklintempletondatasources.com for additional data provider information.

Investable Emerging Markets in Dec 2016

- > 70 markets

Emerging Markets - 2016

4

5

Shanghai, China : About 25 Years Ago

6

Shanghai, China : Now

7

Dubai, U.A.E. : About 25 Years Ago

8

Dubai, U.A.E.: Now

9

Dubai, U.A.E.: Now

For Internal Use Only / Not for Distribution to the Public

Frontier Markets:

The Next Exciting Destination


Investments.

Frontier Markets*

11Source: MSCI, S&P & IFC (International Finance Corporation), EIU (Economist Intelligence Unit) as of December 2012.

*The above is just a selected number of markets and is by no means an exhaustive list of markets defined as Frontier Markets. The Frontier Markets countries are generally smaller, less

developed and less accessible than Emerging Markets countries, but with "investable" equity markets and include those defined as Frontier Markets by International Finance Corporation

as well as included in Frontier Markets related indices


Investments.

World’s Ten Fastest-growing Economies:

All Are Emerging Market Countries. Eight Are Frontier.

12

Source: EIU

Five of the world’s ten fastest-growing economies were in Africa, Four from Asia and one from Commonwealth of Independent States (our ranking excludes countries with a population of

less than 10m as well as Iraq and Afghanistan; 2017F, as of Feb 2017

Annual Average GDP Growth 2012-2016 % (Avg), & 2017F

% 2012-2016e 2017F

Ethiopia 9.1 7.5

Côte d'Ivoire 8.8 8.0

Myanmar 7.9 7.7

Uzbekistan 7.7 6.0

China 7.3 6.2

D.R.Congo 7.2 4.2

Cambodia 7.2 6.9

India 6.9 7.6

Tanzania 6.7 7.2

Rwanda 6.7 6.0


Investments.

Frontier Markets:

Demographic Dividend

13


Investments.

41

32

26

0

5

10

15

20

25

30

35

40

45

Developed Markets Emerging Markets Frontier Markets

Source : World Bank, June 2017

2015

14

Frontier & Emerging Vs Developed Markets:

Median Age

Median Age


Investments.

Emerging & Frontier Markets: Market Cap/GDP

Frontier Markets as defined by the MSCI EM Frontier Markets Index; Emerging Markets are defined by the MSCI Emerging Markets Index; Developed Markets are defined by the MSCI World Index.

Source: MSCI via FactSet. MSCI makes no warranties and shall have no liability with respect to any MSCI data reproduced herein. No further redistribution or use is permitted. This report is not prepared

or endorsed by MSCI. Past performance is not an indicator or a guarantee of future performance.

See www.franklintempletondatasources.com for additional data provider information.

Frontier Markets Emerging Markets Developed Markets

Market Cap

% GDP 32% 104% 117%

As at 31 August 2017

15

Emerging Markets:

Becoming Increasingly Important


Investments.

2721.447

16.198

19.889

0%

5%

10%

15%

20%

25%

30%

35%

0

5.000

10.000

15.000

20.000

25.000

1987 1997 2007 2015Source : World Bank, World Federation of Exchanges database.

1987 –2015

17

Emerging Markets: Market Capitalization

Since 1987

% of World

Market CapUS$ Billion


Investments.

19%

24%

31%

42%

24%

30%

42%

47%

23%

32%

38%

44%

0%

10%

20%

30%

40%

50%

1987 1997 2007 2016

GDP Exports Imports

Source : World Bank, June 2017

1987 –2016

18

Emerging Markets: GDP & Trade

% of World

GDP export Import GDP export Import GDP export Import GDP export Import


Investments.19

Continued Future Fast Growth

19


Investments.20

Emerging Vs Developed Markets:

GDP Growth 2017F

2017F

1,8%

4,6%

Developed Markets Emerging Markets

0,0%

0,5%

1,0%

1,5%

2,0%

2,5%

3,0%

3,5%

4,0%

4,5%

5,0%

Source: IMF, EIU

There is no assurance that any projection, estimate or forecast will be realized.

%


Investments.21

EM Strong Fiscal Conditions

21


Investments.22

US

$ b

n

1995 – 2015 (US$ Billion)

Foreign Reserves:

Emerging Vs. Developed Markets

1.0041.295

2.129

3.381

4.192

469733

2.251

6.330

7.060

1995 2000 2005 2010 2015

0

1.000

2.000

3.000

4.000

5.000

6.000

7.000

8.000Developed Markets

Emerging Markets

Source: EIU


Investments.

%

Developed Markets

23

%

Emerging Markets

Public Debt % of GDP:




Investments.

%Developed Markets

24

%

Emerging Markets

Private Debt % of GDP:



Investments.25

Emerging Markets:

Large Land Mass


Investments.

26

35.073.137

94.660.036

Developed Markets Emerging MarketsSource: World Bank

Emerging Vs Developed Markets: Land AreaEM Covers More than 70% of World Land Area

26

Land area (sq. km)


Investments.27

Emerging Markets:

Large Population


Investments.

28

1,4

5,9

Developed Markets Emerging MarketsSource: United Nations

Emerging Vs Developed Markets: PopulationLarge Population

28

Billion (2015)

29

Currencies: Key Role


Investments.

Emerging Markets: MSCI Currency Index

3-Year Period

+15%-15%

30



Investments.31

Major EM: Currency Performance Vs.US$ :

Since Recent Low

30th September 2017

46%

33%

24%

9% 9%7% 6% 6%

0% 0%

Russia01/16

Brazil09/15

SouthAfrica01/16

Korea02/16

Indonesia09/15

Singapore12/16

Turkey01/17

China01/17

Hong Kong01/16

Philippines08/17

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Source : Bloomberg; x-axis shows country name and Low date

32

Significant Undervaluation of

Some EM Currencies


Investments.

4,0

4,5

5,0

5,5

6,0

6,5

7,0

7,5

8,0

8,5

9,001/90 01/92 02/94 02/96 02/98 01/00 01/02 01/04 01/06 01/08 01/10 01/12 01/14 01/16

RMB/ US$ Exchange Rates vs China/ US PPP Index

33

China: Purchasing Power Parity Vs US$

Since January 1990

RMB per US$China / US PPP Base Date: JAN 1990

RMB

undervalued 19%

14/07/17:

6.8 RMB/

US$

Source : Factset; IMF; EIU; Franklin Templeton Investments; Base date: Jan 1990. As at 14 July 2017.



Investments.

0,0

0,5

1,0

1,5

2,0

2,5

3,0

3,5

4,0

4,501/90 01/92 02/94 02/96 02/98 01/00 01/02 01/04 01/06 01/08 01/10 01/12 01/14 01/16

Real/ US$ Exchange Rates vs Brazil/ US PPP Index

34

Brazil: Purchasing Power Parity Vs US$

Since January 1990

Real per US$Brazil/ US PPP Base Date: JAN 1990

Real undervalued

8%

14/07/17:

2.9 Real/

US$




Investments.

600

800

1.000

1.200

1.400

1.600

1.80001/90 01/92 02/94 02/96 02/98 01/00 01/02 01/04 01/06 01/08 01/10 01/12 01/14 01/16

Won/US$ Exchange Rates vs Korea/ US PPP Index

35

Korea: Purchasing Power Parity Vs US$

Since January 1990

Won per US$Korea/ US PPP Base Date: JAN 1990

Won

undervalued 15%

14/07/17:

1,126 Won/

US$



Commodity Prices:

Recovery Signs


Investments.37

Commodity Prices:

% Change Recent Low

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Platinum, Jan_16

Gold, Dec_15

Silver , Dec_15

Nickel, Feb_16

Copper, Jan_16

Tin, Jan_16

Natural Gas, Mar_16

Palladium, Jan_16

Crude Oil , Feb_16

Source: Factset; last updated September 2017; % change in US$. See www.franklintempletondatasources.com for additional data provider information.

Commodity_low date

% Change from Low to 30th September 2017


Investments.38

Iron Ore Imports in VALUE (US$ Million)

China

0

20.000

40.000

60.000

80.000

100.000

120.000

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

China

Sources: ITC calculations based on UN COMTRADE statistics.; Iron ores and concentrates, incl. roasted iron pyrites

US$ Million

2001 to 2016


Investments.39

Iron Ore Imports in QUANTITY (Million Tons)

China

0

200

400

600

800

1.000

1.200

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

China

Sources: ITC calculations based on UN COMTRADE statistics.; Iron ores and concentrates, incl. roasted iron pyrites

Million Tons

2001 to 2016


Investments.40

Oil Consumption in VALUE (US$ Million)

China

0

50.000

100.000

150.000

200.000

250.000

300.000

350.000

400.000

450.000

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

China

Sources: BP Statistics 2017

US$ million

2001 to 2016


Investments.41

Oil Consumption in QUANTITY (Barrels/Day)

China

4.000

5.000

6.000

7.000

8.000

9.000

10.000

11.000

12.000

13.000

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

China

Sources: BP Statistics 2017

Thousand barrels daily

2001 to 2016

Interest Rates and the Market


Investments.43

Emerging Markets Vs FED Fund Rate:

Since 1987

FED Fund rateMSCI EM Index



Investments.44

Lots of Value in EM

44


Investments.

Source: MSCI; Developed Markets as represented by the MSCI World ; Emerging Markets as represented by MSCI Emerging Markets;


45

Emerging Vs. Developed Markets: P/E

Valuations

P/E - 12 Months Forward, September 2017

12,5

16,7

Emerging Markets Developed Markets


Investments.46

Emerging Vs. Developed Markets:

EPS Growth, 12-Month Forward

Source: MSCI; I/B/E/S, Developed Markets as represented by the MSCI World ; Emerging Markets as represented by MSCI Emerging Markets; 12 Months Forward EPS Growth


EPS Growth, September 2017

13,9

10,4



Investments.47

Emerging Vs. Developed Markets:

Return on Invested Capital

Source: MSCI;Factset Aggregate, Developed Markets as represented by the MSCI World ; Emerging Markets as represented by MSCI Emerging Markets;There is no assurance that any

projection, estimate or forecast will be realized.

ROIC, September 2017

7,1

5,8


Internet = Technology TransferAcceleration


Investments.

49Source: Internet Live Stats; updated July 2017

China 21%

Japan 3%

Russia 3%

India 14%

Brazil 4%

U.S. 9%

U.K. 2%

France 2%

Germany 2%

Nigeria 3%

• Around 40% of the world’s population has an Internet connection today; back in 1995, less than 1% did.

• The number of Internet users has increased tenfold from 1999 to 2013; the first billion was reached in 2005, the

second billion in 2010 and the third billion in 2014.

The InternetTop 10 countries’ share of world internet usage 2016


Investments.

2008 – 2017F

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017F

0

200

400

600

800

1000

1200

1400

1600

Emerging Markets

Developed Markets

Units ( Million)

Source: Gartner; Credit Swiss First Boston; Company data; GFK,June2017

There is no assurance that any projection, estimate or forecast will be realized

63% 63% 61% 53% 41% 32%37% 37%

39%47%

59%68%

50

30%

70%

30%

70%

Global Smartphone : Sales

28%

72%

28%

72%


Investments.

Technology: Chinese Online SpendingSingles Day Biggest Retail Event Globally

51

For illustrative and discussion purposes only.

Source: Bloomberg; Techcrunch, Black Friday online sales US$3.3B, Cyber Monday; US$3.45bn and Thanksgiving US$1.9bn

Total was for the period from 24-28 November 2016.

$17.8B

Alibaba Singles Day Sales

$12.8BAll Retailers in US

2016

Thanksgiving, Black Friday, &

Cyber Monday Online Sales

2016


Investments.

Source : WiPO

52

Emerging Vs Developed Markets:

Patent applications

% of Total Applications

80,4

19,6

2005


53,5

46,5

2015


53

Emerging Markets’ Reform

Movements

For professional investor use only. Not for distribution to retail investors.


Investments.

54

Korea: Reform Movements

• President Park Geun-hye corruption Scandal.

Involving shamanistic friend’s influence

• Bribery, misuse of power, illegal disclosure of

government information.

• President Park impeached.

• Chaebol officials from Samsung, Hyundai, SK, LG,

Hanwha, CJ and POSCO, US$ 70 million donations to

Choi’s foundations.

• Samsung’s Jay Y. Lee indicted on corruption charges

for giving $38 million in bribes to Choi Soon-sil.

Source: Reuters, The Guardian


Investments.

55

Brazil: Reform Movements

• Lavo Jato Scandal. 2004 and 2014, state-run Petrobras (Brazil's

largest company) engaged in massive corruption involving at

least $5.3 billion.

• Construction executives in collusion with Petrobras executives

secretly created a cartel to coordinate bids with inflated

contracts.

• From 2003 to 2010 President Dilma Rousseff was the Board

Chairwoman of Petrobras. Rousseff impeached on 31 August

2016.

• Marcelo Odebrecht, the head of Brazil's largest construction

company was sentenced to 19 years for bribery and money

laundering in March 2016

Source: Reuters, Vox


Investments.

56

Argentina: Reform Movements

• President Cristina Fernández de Kirchner, and ex-planning

minister charged with taking millions of public funds.

Judge ordered to freeze $633m of each defendant’s assets.

• President Mauricio Macri wins Dec 2015 election for

President with his “Let’s Change” slogan . After taking

office:

• Lifted currency controls;

• Settled a decade-long lawsuit that blocked Argentina

from international capital markets;

• Launched a $16.5bn bond

• Began to compile and release accurate national

statistics for the first time in a decade;

• Hiked heavily subsidised utility tariffs.

Source: BBC; Guardian


Investments.

Emerging Markets Private Equity

57


Investments.58

Global EM Private Equity: Sector Exposure

EM Private Equity:

83% from Consumer, Industrials, Health Care and Technology sectors

Source: EMPEA, and MSCI December 2016 Emerging Markets Private Equity is represented by Emerging Markets Private Equity and Venture Capital Index and Emerging Markets Public Equity is represented by MSCI Emerging Markets Index. MSCI makes no warranties and shall have no liability with respect to any MSCI data reproduced herein. No further redistribution or use is permitted. This report is not prepared or endorsed by MSCI. Most recent data available. Data is historical and subject to change

0,3%

0,4%

3,3%

9,7%

10,1%

13,1%

25,8%

37,2%

0% 5% 10% 15% 20% 25% 30% 35% 40%

Utilities

Basic Materials

Telecommunications

Health Care

Technology

Financials

Industrials

Consumer

58


Investments.59

Global EM Public Equity: Sector Exposure

EM Public Equity:

49% from Consumer, Industrials, Health Care and Technology sectors

Source: EMPEA, and MSCI December 2016 Emerging Markets Private Equity is represented by Emerging Markets Private Equity and Venture Capital Index and Emerging Markets Public Equity is represented by MSCI Emerging Markets Index. MSCI makes no warranties and shall have no liability with respect to any MSCI data reproduced herein. No further redistribution or use is permitted. This report is not prepared or endorsed by MSCI. Most recent data available. Data is historical and subject to change

2,5%

2,6%

2,9%

5,8%

5,9%

7,4%

7,9%

17,5%

23,3%

24,4%

0% 5% 10% 15% 20% 25% 30%

Health Care

Real Estate

Utilities

Industrials

Telecommunications

Materials

Energy

Consumer

Technology

Financials

59

60

Confidence and Fund Flows


Investments.

For illustrative and discussion purposes only. Past performance is not an indicator or a guarantee of future performance.

Source: FactSet Research Systems Inc.; Merrill Lynch Fund Manager’s Survey. Data last updated: September 2017. Based on Merrill Lynch Fund Manager’s Survey on Net

percentage saying they are underweight or overweight Emerging Markets Equities; positive figures represent percentage of investors overweight while negative figures

represent underweight; See www.franklintempletondatasources.com for additional data provider information.

Net

% W

eigh

t

Underweight

Overweight

Emerging Markets: SentimentEmerging Markets Exposures Picking Up

Net Percentage of Investors Over / Underweight Emerging Markets

January 2007 to September 2017

61

Net

% W

eigh

t

Underweight

Overweight

-40

-30

-20

-10

0

10

20

30

40

50

60

70

01.07 01.08 01.09 01.10 01.11 01.12 01.13 01.14 01.15 01.16 01.17

http://www.franklintempletondatasources.com/


Investments.62

0

500

1.000

1.500

2.000

2.500

-60

-40

-20

0

20

40

60

80

100

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17

1996 – YTD 2017

Emerging Markets

Flows Into EM Equity Funds Globally

Net Flows

US$ BillionMSCI EM

Index (US$)

Net EM Equity Annual

Fund Flows

Emerging Markets Index

Source: EPFR Global, Equity Fund Flows Database (see last page for details), Morgan Stanley Research. Data as of Jul 26, 2017. *Dedicated EM Equity Fund Flows

include GEMs, LatAm, EMEA and EM Asia (ex China A) regional funds; including both ETF and Non-ETF


Investments.

Source: MSCI, Factset. All MSCI data is provided “as is.” In no event shall MSCI, its affiliates or any MSCI data provider have any liability of any kind in connection with the MSCI data described herein. Copying and redistributing the

MSCI data is strictly prohibited. Index returns include reinvestment of dividends. Indices are unmanaged, and one cannot invest directly in an index. Emerging markets as represented by the MSCI Emerging Markets Index and world as

represented by the MSCI World Index. Past performance is not an indicator or a guarantee of future performance. See www.franklintempletondatasources.com for additional data provider information.

63

Emerging Markets: Performance

Since 1987



Investments.

Source: FactSet;. Based on 30% decline from the peak and 30% increase from the bottom.

Past performance is not an indicator or a guarantee of future performance. See www.franklintempletondatasources.com for additional data provider information.

MSCI Emerging Markets Price Index

Bear Market Is Defined As A Decline Of Over 30%

64

-35%

17 months



Investments.

Bull Markets Bear Markets

Source: FactSet; 31 Dec 2016. *Bull and bear markets are based on 30% changes of the MSCI EM Index , average does not take into account the current bull numbers.

Past performance is not an indicator or a guarantee of future performance. See www.franklintempletondatasources.com for additional data provider information.

Dates

%

Increase

# of

Months Dates

%

Decline

# of

Months

Bull 01/88-08/97 619% 116 Bear 08/97-09/98 -56% 13

Bull 09/98-04/00 114% 19 Bear 04/00-10/01 -49% 17

Bull 10/01-11/07 537% 73 Bear 11/07-10/08 -65% 12

Bull 10/08-08/14 154% 66 Bear 08/14-02/16 -35% 17

Bull 02/16-

Average 356% 69 -51% 15

Emerging Markets : Bear / Bull Markets

65



Investments.

Follow Us On 66

66


Investments.67

Important Information

Copyright © 2017. Franklin Templeton Investments. All rights reserved.

Franklin Templeton Investments (Asia) Limited is the issuer of this document. The document, which is

for informational purposes only, sets forth our views as of the date published. The stock provided is for

illustration purpose only. It is not a recommendation to purchase, sell or hold any particular security.

The stock identified is not necessary indicative of a portfolio's holding at any one time. The underlying

assumptions and these views are subject to change. There is no guarantee that any forecasts

expressed will be realized. Franklin Templeton Investments accepts no liability whatsoever for any

direct or indirect consequential loss arising from use of this report or any information, opinion or

estimate herein. This document has not been reviewed by the Securities and Futures Commission of

Hong Kong.

Franklin Templeton Investments (Asia) Limited

富蘭克林鄧普頓投資(亞洲)有限公司

17/F Chater House, 8 Connaught Road Central, Hong Kong

Tel: (852) 2805 0111 Fax: (852) 2519 9482

Date post:	03-Aug-2020
Category:	Documents
Upload:	others
View:	1 times
Download:	0 times

Investing in Emerging Markets - Pentapenta-pco.com/ifmc-zse-2017/prezentacije/WEBSITE_October...

Documents