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Uncovering Hidden Emerging Market Gems


UNCOVERING HIDDEN EMERGING MARKET GEMS

A fter a strong 2017, the recent market volatility has made many investors reconsider their allocation to Emerging Markets. In contrast, Franklin Templeton embraces volatility as an opportunity to find hidden value. The Templeton Emerging Markets Group (TEMG) shared with us why they believe the long-term investment case remains solid for Emerging Markets and explained how their disciplined investment process has led to long-term outperformance.

Investment Success in the Emerging Markets
TEMG has always believed that successful investing requires a long-term but flexible investment approach driven by fundamental and bottom-up research throughout market cycles. The team adopts a holistic approach to finding value –– to identify undervalued or out-of-favor companies with sustainable earnings growth. Their portfolio is constructed from pure bottom-up stock picking, with country and sector weightings an outcome of the process.
Seeing Opportunities Across Asia
TEMG’s portfolios are heavily invested in China, South Korea, and Taiwan. The team continues to find abundant value opportunities across Asia, one of the fastest growing regions in the world. Furthermore, the team finds many Asian stock markets are riding on strong economic and earnings growth, as well as more robust consumer trends, driven by reforms and business friendly government policies. Taking India as an example, various reforms have been put in place, including the GST bill, in order to open up business opportunities for corporates. Besides, it is exciting to see a new generation of innovative companies in Asia shifting into technology, higher value-added goods, and services. The team believes that this is a good complement to existing business models that tend to focus on infrastructure, telecommunications, traditional banking or commodities.
Overall, TEMG thinks that the Emerging Markets’ consumption story remains intact, underpinned by strong growth and trade, favorable demographics, technological transformation and the consumption upgrade demand from the rising middle class. As household income continues to grow in these markets, the demand for goods and services is set to boom. Therefore, their portfolio is tilted towards direct and indirect consumer plays, all of which are able to benefit from the untapped consumer spending potential of the young and growing population.
Capturing Alpha
Amid the changing socio-economic status of emerging economies and the consumption upgrade cycle, TEMG believes that their prudent, bottom-up stock selection based on fundamental research enables them to generate alpha over the long term. They adhere to their investment process consistently throughout different market conditions, yet their research process is dynamic –– analysts adjust their underlying financial assumptions and long-term earnings forecasts to appropriately reflect the latest market, industry or company specific developments.
2018 Risk Outlook
Apart from political events, the team warns that investors should keep a close eye on higher bond yields, rising market volatility, and China’s resolve to deleverage, all of which could have negative impacts on the markets.
Regardless of the macro environment, to mitigate risk, TEMG remains bottom-up, fundamentally-driven and valuation-focused. They, therefore, see dips in the markets as opportunities to buy stocks cheaply, and they pay attention to valuations and long-term earnings growth prospects in order to avoid buying or holding expensive stocks. BM

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發掘隱藏的新興市場寶石

過2017 豐收之年後,最近的市場波動使許多人重新考慮他們對新興市場的配置,而富蘭克林鄧普頓則認為波動是找尋隱藏價值的機會。我們請來鄧普頓新興市場團隊,探討他們認為投資於新興市場長期而言依然出色的原因,以及其投資流程如何為組合帶來跑贏大市的長期表現。

投資新興市場的秘訣
鄧普頓新興市場投資團隊(下稱鄧普頓團隊)始終認為,投資成功需要長期而靈活的投資方式,在市場週期中進行基本分析和由下而上的研究。鄧普頓團隊採用全面的方法尋找價值——識別出盈利持續增長但價格被低估或被市場忽略的公司。他們的投資組合純粹採用由下而上的選股策略,並以國家和行業比重組成。
亞洲市場的豐富投資機會
談到國家比重,鄧普頓團隊的新興市場投資組合特別則重中國、南韓和台灣的亞洲股票。目前對亞洲持較高比重,因為他們持續在這個全球發展最快之一的地區找到豐富的投資機會。亞洲許多股市正受強勁的經濟和盈利增長推動,加上愈見強勁的消費勢頭,和行業改革和有利營商的政府政策,亞洲股市前景相當看俏。以印度為例,當地推行了各項改革,包括實施商品服務稅(GST法案),為企業開拓商機。此外,鄧普頓團隊很高興看到亞洲的新一代創新公司轉向技術型、更高附加值的商品和服務的業務領域。他們認為這能填補現有業務模式,這些業務模式往往側重於基礎建設、電訊、傳統銀行業務或商品。
總體而言,鄧普頓團隊認為新興市場的消費投資主題依然良好,由強勁增長、人口變化、技術轉型以及中產消費階級崛起的需求支持。隨著新興市場家庭收入持續增長,對商品和服務的需求將會激增。因此,他們的投資組合傾向投資於直接和間接的消費者行為,這些都能夠從年輕人和人口不斷增長的消費潛力中受惠。
團隊如何抓住額外回報(α)
在新興經濟體的社會經濟變化以及剛才提到的消費升級週期中,鄧普頓團隊相信,他們謹慎的基本分析,以及由下而上的選股策略,使他們的組合能夠長期報得額外回報(α)。他們在不同市況下堅守他們具動量的投資流程,分析員會調整其基本財務假設和長期盈利預測,以適當反映當前市況、行業或特定公司的發展情況。
2018 年風險特別注意
除政治事件外,鄧普頓團隊告知投資者應密切關注債券利率上升,市場波動加劇以及中國決心去槓桿化的結果,所有這些都可能對市場產生負面影響。
無論宏觀環境如何,團隊仍然是以由下而上策略、基本分析以及估值為重點來選股。因此,他們認為市場下跌是低價買入股票的機會,他們亦密切留意股票的估值和長期盈利增長前景,以避免買入或持有價格高昂的股份。BM

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