Emerging Markets Come Of Age

IS IT TIME TO RETHINK EMERGING MARKETS?

Emerging markets have come a long way since Franklin Templeton launched the first fund of its kind over 30 years ago—but many investors have outdated perceptions. The implications are serious. Underestimating these countries means overlooking some of the fastest-growing economies in the world.

Templeton Emerging
Markets Fund

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Franklin LibertyQT
Emerging Markets
Index ETF

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Three New Realities In Emerging Markets

Portfolio Manager Nicole Vettise reveals three new realities that are reshaping emerging markets.

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HERE ARE THREE NEW EMERGING MARKET REALITIES:

EMERGING MARKETS ARE SO MUCH MORE THAN COMMODITIES

Shopping and technology are the new drivers of growth

When the first ten emerging market countries were bundled together 30 years ago, they produced commodities, low-cost manufacturing and…not much else. The guidebook was simple: produce locally and sell abroad. Countries with access to oil, precious metals and huge workforces thrived in the category’s early days – but their fortunes were tied to the developed world.

Things have changed. Today’s 24 emerging market countries offer so much more than energy and raw materials. And spending by the growing middle class is making emerging markets more independent.

IT’S NO LONGER A MATERIALS WORLD

Energy & Materials


Sources: Sector information: MSCI EM Index, as of December 31, 2020.

Information Technology & Communication Services

Sources: Sector information: MSCI EM Index, as of December 31, 2020.

GROWING MIDDLE CLASS CONSUMPTION

Consumption: Emerging Markets vs. Developed Markets (Projected)

Consumption: Emerging Markets vs. Developed Markets (Projected) chart Sources: Sector information: MSCI EM Index, as of December 31, 2019.

EMERGING MARKET COMPANIES ARE BECOMING TECH LEADERS

Patent applications, 2019

Pop quiz: who applied for more patents in 2019 – China or the United States, Japan and Germany combined?

ANSWER >

Patent applications, 2019

Sources: Sector information: MSCI EM Index, as of December 31, 2019.

POLICY AND ECONOMIC IMPROVEMENTS ARE MAKING EMERGING MARKETS MORE RESILIENT

Emerging market reforms have resulted in healthier economies

The emerging markets’ reliance on USD debt is one example of these improvements. When countries borrow in U.S. dollars, their debts become vulnerable to currency shifts. Any drop in the value of local currency vs. the greenback could prompt a crisis. Today’s emerging markets have diversified their sources of borrowing.

How much debt is U.S. Denominated?

How much debt is U.S. Denominated? Source: Franklin Templeton Capital Markets Insight Group, Bank for International Settlements, and Institute of International Finance, as of June 2019.

THE TEAM BEHIND TEMPLETON EMERGING MARKETS FUND

Local knowledge, global reach

In a sea of overlooked and under-researched companies, there’s no substitute for local market knowledge.

Our on-the-ground investment team of more than 80 portfolio managers and analysts across 16 countries distinguishes Franklin Templeton Emerging Markets Equity from the crowd. Investors benefit from our networks of local business contacts, access to in-person company visits and real-time response to local market events.

Is it time for you to rethink emerging markets? Talk to your advisor about how these solutions can complement your portfolio.

As of February 29, 2020. Please refer to Excellence, Recognized for more information about Morningstar risk-adjusted ratings.