Focusing on Fundamental Improvement
2019-12-24 08:50

I'm fortunate to be able to work with an outstanding team at Templeton Emerging Markets Group, which includes individuals with diverse backgrounds and areas of expertise. My colleague Carlos Hardenberg is a key member of our team and brings a wealth of experience as a research analyst, portfolio manager and world traveler who has lived in several different countries. I thought I'd invite Carlos to share his perspective on the opportunities and challenges he sees in emerging markets today and as we head into 2017.

在邓普顿新兴市场团队,我有幸能够与一支优秀的团队共事,他们有不同的背景和各自擅长的领域。Carlos Hardenberg是我们团队的核心成员,作为研究分析师、基金经理以及在多个国家居住过的全球旅行家,Carlos 为我们带来了丰富的经验。我邀请了Carlos分享他对于新兴市场现在和2017年所面临的机遇和挑战的看法。

This post is also available in: Chinese (Simplified), French, German


A cloud of skepticism still appears to be hanging over emerging markets, but we think it's now time to focus on fundamental economic realities. Short-term market volatility aside, over the last couple of months we've seen significant improvements across the majority of metrics that we measure in emerging markets, including sentiment.


In a number of emerging-market countries in both Latin America and Asia, we see economic activity that is still far below potential, but there have been signs on both the manufacturing and consumer sides that sentiment is improving. This is especially true in countries in Asia that have adopted reform processes, such as Indonesia and India. In India, in particular, we think that recent developments undertaken by the Narendra Modi-led government have shown it is really willing and able to implement reforms.


Reforms appear to be on the agenda for China too, although in our view China is very good at making eye-catching announcements but perhaps not as good at delivering on the execution of all of its plans, notably in the field of privatization and other public sector reforms.



Commodity Pricing Has Supported Improving Export Levels


There is now clear evidence that export levels have been generally improving in emerging markets. Many countries have benefited to a great extent from commodity prices, which have been at more reasonable levels than in the past. Certainly, lower commodity prices are hurting businesses running a high-cost-base operation, but they have benefited those markets that are investing in infrastructure, especially the big consumer markets purchasing cheaper commodities. Lower commodity prices also have translated directly into better current account balances for almost all emerging markets.


Don't Underestimate Current Account Balance Improvement


We think one should not underestimate the implications of the very sharp improvement in emerging-market current account balances, especially in the face of potentially rising US interest rates. In particular, we believe that the healthier shape of current accounts could serve as a significant mitigating factor for emerging-market currencies generally against the vulnerability associated with the higher cost of refinancing in hard currency should the US Federal Reserve (Fed) embark on a rate-raising path.


It's a further positive sign, in our view, that overall debt levels are low in emerging markets and that in many cases we've seen a gradual reduction in interest rates—notably in Brazil and a number of Asian countries. Of course, there are some exceptions; some countries haven't done their homework, in our view.

新兴市场整体债务水平低,而且多个市场正在逐步减息(尤其是巴西和多个亚洲国家),这些都是进一步的正面信号。当然 ,也有一些例外,我们认为某些国家并没有做功课。

Impact of Rising US Interest Rates


Our research shows that if one looks back at periods of previous US interest-rate increases (for example between 1998 and 2000 or 2003 and 2007) underlying emerging-market currencies rallied.1 It's a similar story for emerging-market equities.


In regard to emerging-market equities, the trend generally appears to be a period of weakness up to the actual event of the first increase in interest rates. Once that event has been priced in and absorbed, then in general emerging markets (six out of seven cases as reflected in the chart below) have been able to advance. Our opinion is that current market conditions—notably in terms of relative valuation, relative debt levels and current account balances in emerging markets—would support this scenario again should the Fed tighten rates.


1216_em_fed_equities 1216_EMFed_Currency2.png 1216_emfed_currency2

How Does Economic Good News Translate to Corporate Earnings?


Notwithstanding the raft of generally positive fundamental economic data, earnings at the corporate level in emerging markets have been through a weak period recently—almost all emerging markets have observed a contraction in absolute terms, and many have seen a contraction in relative growth—but for the first time in five years, we have begun to see a potential turnaround.


An analysis of third-quarter 2016 reported results indicates that emerging-market corporate earnings outpaced developed countries by a wide margin and have begun to outpace their own five-year history. We have a fairly optimistic view of the nearer-term quarters from an earnings perspective and believe next year should be another supportive year for the corporate earnings recovery in emerging markets, albeit coming from a fairly low base.



Comments, opinions and analyses are for informational purposes only and should not be considered individual investment advice or recommendations to invest in any security or to adopt any investment strategy. Because market and economic conditions are subject to rapid change, comments, opinions and analyses are rendered as of the date of the posting and may change without notice. The material is not intended as a complete analysis of every material fact regarding any country, region, market, industry, investment or strategy.


Important Legal Information


This material is intended to be of general interest only and should not be construed as individual investment advice or a recommendation or solicitation to buy, sell or hold any security or to adopt any investment strategy. It does not constitute legal or tax advice. The companies and case studies shown herein are used solely for illustrative purposes; any investment may or may not be currently held by any portfolio advised by Franklin Templeton Investments.

本文只供一般性参考,不应被视为个人投资建议,或推荐投资者购买、出售、持有任何证券及采纳任何投资策略的建议或招揽,不构成法律或税务咨询。本文所列的公司和案例研究仅供说明;富兰克林邓普顿(Franklin Templeton)所建议的任何投资组合目前尚未确认是否存在投入。

The opinions are intended solely to provide insight into how securities are analyzed. The information provided is not a recommendation or individual investment advice for any particular security, strategy, or investment product and is not an indication of the trading intent of any Franklin Templeton managed portfolio. This is not a complete analysis of every material fact regarding any industry, security or investment and should not be viewed as an investment recommendation. This is intended to provide insight into the portfolio selection and research process. Factual statements are taken from sources considered reliable but have not been independently verified for completeness or accuracy. These opinions may not be relied upon as investment advice or as an offer for any particular security. Past performance does not guarantee future results.


The views expressed are those of the investment manager and the comments, opinions and analyses are rendered as at publication date and may change without notice. The information provided in this material is not intended as a complete analysis of every material fact regarding any country, region or market.


Data from third party sources may have been used in the preparation of this material and Franklin Templeton (“FT”) has not independently verified, validated or audited such data. FT accepts no liability whatsoever for any loss arising from use of this information and reliance upon the comments opinions and analyses in the material is at the sole discretion of the user. Products, services and information may not be available in all jurisdictions and are offered outside the U.S. by other FT affiliates and/or their distributors as local laws and regulation permits. Please consult your own professional adviser or Franklin Templeton institutional contact for further information on availability of products and services in your jurisdiction.

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What Are the Risks?


All investments involve risks, including the possible loss of principal. Investments in foreign securities involve special risks including currency fluctuations, economic instability and political developments. Investments in emerging markets, of which frontier markets are a subset, involve heightened risks related to the same factors, in addition to those associated with these markets' smaller size, lesser liquidity and lack of established legal, political, business and social frameworks to support securities markets. Because these frameworks are typically even less developed in frontier markets, as well as various factors including the increased potential for extreme price volatility, illiquidity, trade barriers and exchange controls, the risks associated with emerging markets are magnified in frontier markets. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions.


To get insights from Franklin Templeton delivered to your inbox, subscribe to the Investment Adventures in Emerging Markets blog.

有意从富兰克林邓普顿(Franklin Templeton)的邮件中了解更多信息,请订阅“新兴市场的投资冒险”(Investment Adventures in Emerging Markets)博客。

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有意及时投资的话,请在推特上关注 @FTI_emerging和LinkedIn。

The technology industry can be significantly affected by obsolescence of existing technology, short product cycles, falling prices and profits, competition from new market entrants as well as general economic conditions. The technology sector has historically been volatile due to the rapid pace of product change and development within the sector.




1. Past performance is not an indicator or a guarantee of future performance.

[1] 过往表现并非将来结果的指示或保证。

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