Investors Living in Emerging Markets are a Bullish Bunch!
Part of my job involves putting myself out on a limb at times, and I have taken the risk of being subject to contrary (sometimes enthusiastically so) viewpoints. I’ve even been accused of being too optimistic about emerging markets, perhaps partly because my views often represent a stark contrast to dramatic news headlines. So when I took a look at the findings of Franklin Templeton Investments’ 2013 Global Investor Sentiment Survey (GISS),1 I was pleased to discover my longstanding optimism about emerging markets seems to be spreading among investors. According to the GISS survey, investors residing in emerging markets are more upbeat about their prospects this year and in the next 10 years than those in developed markets. Of special interest to me among the survey’s findings was that many investors seem to be at least recognizing the merit of investing globally, even if the bulk of their investment dollars stayed close to home. It still looks like most plan to keep the majority of their assets in their local markets (a “home country” bias), but many report they plan to up their allocations into other markets, including emerging markets. Read more…
China’s Building, but Will They Come? The Space Race
As I mentioned in a previous blog post, there has been a lot of recent media attention focused on the building boom that has been taking place in China, and some observers have jumped to the conclusion that it’s unsustainable. I felt this topic warranted further discussion. We certainly are not seeing 12 to 20 cities the size of New York going up in China, so it’s important to keep things in perspective. It is true that there is a construction boom in China, but that’s mainly because there is a shortage of quality housing and office buildings. It is also true that some projects are big, and not all buildings are occupied all at once. Some buildings are likely to be filled as soon as the occupation permits are obtained. Based on those realities, it’s easy to see that such large developments (“cities”) may be temporarily empty. I wanted to see for myself what exactly was going on, so my team and I embarked on a tour of some new developments in China. Here is my account. Read more…
China’s Building, but Will They Come? Ghost Cities
Some of you may have heard or read about the current state of the real estate market in China, often covered in a sensationalistic way, with talk of “ghost cities” and “bubbles” ready to burst and so forth. These types of reports can cause quite a jolt in the market, which is what we saw happen, probably not coincidentally, after a popular US television newsmagazine aired a somewhat negative report in March. But as I’ve said many times before, there’s often more to a story; important parts can end up on the cutting room floor. Read more…
Growth From the Ground up in Iskandar
Our emerging markets team isn’t too keen on following crowds. Part and parcel of Templeton’s contrarian approach is traveling to places others aren’t, and thinking about the long-term potential in specific industries and companies that may not be on others’ radar screens. One place we’ve had our eye on for several years now is Iskandar, Malaysia, which has recently been attracting more investor attention. I think it could be viewed as an example of the potential we see in Southeast Asia. Read more…
Korean Uncertainties
The uncertainties and risks on the Korean peninsula have been with us for a long time, dating back to the end of the Korean War in 1953. The threat of invasion from North Korea and various actions it has instigated against South Korea over the years have been ongoing. Therefore, most foreign investors are well aware of the situation and therefore we don’t believe we’ll see any large scale investor withdrawal from South Korea at this stage, unless things change dramatically for the worse. Certainly, any increase in tensions on the Korean peninsula could result in some capital moving from South Korea into other markets in Asia, such as China, Japan and Hong Kong. However, we do not see that happening broadly at this stage. Read more…
On Following Instincts – and Crowds
I’m a believer in managing expectations, but I’ve found there are few better ways to undermine your potential travel enjoyment and investment success than limiting yourself with preconceived notions.
That being said, I myself have fallen victim to (wrongful) assumptions or biases. When my team and I traveled to the Republic of Botswana recently, I was, to be honest, expecting dilapidated infrastructure and generally depressed conditions as can be seen in some of the Sub-Saharan African countries. The actual experience, however, was quite surprising. When we landed in the capital, Gaborone, we found that the airport was recently remodeled, with a full commitment to creating a pleasant, efficient and overall positive experience for arriving travelers. Read more…
Dodging Soccer Balls and Sharks in Recife, Brazil
Recife, in Brazil’s northeast Pernambuco state, is known to many as the “Venice of Brazil” given its many waterways and bridges.
A welcome winter stop for our emerging markets team, the city is blessed with a tropical climate that’s as warm and sunny as its people. While the residents in this area of Brazil are often regarded as being extremely laid back given the balmy weather, we found them to be very hard workers. For example, our local taxi driver reported working about 12 hours a day, six days a week! We found this seaside and shipping hub was not only a hotbed of tourist activity, but of potential investment opportunities as well. Read more…
The Discipline of Buy and Sell Decisions
The thought of giving up a once-treasured possession can be an emotional exercise for anyone, even if the object of affection has outlived its use. As investors, we can find it difficult to sell a once-favored holding — even more difficult than the decision to purchase it. But sometimes, you just have to let go.
I’ve often been asked about my team’s process, not only in selecting potential opportunities, but also when and how we determine a particular holding may not be worth keeping in a portfolio and bears replacing with something we deem to be a better opportunity. Emotion simply can’t play a role in our decisions. Instead, we pair bottom-up, rigorous research with step-by-step analysis, first identifying potential bargains within a dataset of more than 25,000 securities, then conducting deep quantitative and qualitative analysis to assess each company’s long-term value potential. Read more…
Insights on India: Land of Paradoxes
Attendees of our emerging market conference in Goa, at an Indian-themed dinner
Technology has made it easy for our emerging markets team to stay in contact from nearly every corner of the globe, but electronic communications can’t replace human interaction through a face-to-face exchange of ideas. Twice a year, our 50+ analysts gather together in a single location to share opinions on companies, discuss global events, and conduct a peer review and evaluation. India was the place chosen for the Templeton Emerging Markets Group’s semi-annual meeting in March. I’ve invited my colleague, Chetan Sehgal, to pen his thoughts on India and why we chose it as the location for our most recent gathering. Read more…
Nurturing Undiscovered Companies
Emerging economies can tend to have higher growth rates and can be more dynamic than more mature, developed markets. As such, they often contain a higher proportion of smaller, faster-growing businesses. We believe there’s a potential wealth of untapped opportunities among these small- to medium-sized companies, often at the expansion or pre-initial public offering (IPO) phase, before they make their way onto the listed stage as publicly traded entities. As long-term emerging markets investors, we see this pool of smaller (often private) companies as fishing waters in our hunt for often undiscovered opportunities we think could have potential, with a little nurturing.
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