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EMERGING MARKETS:
NEW ECONOMY
OPPORTUNITIES
Feng Ding
Director, Emerging Markets Equity
Global Product Management
CFA® and Chartered Financial Analyst® are trademarks owned by CFA Institute.
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of Franklin Templeton Investments.
Emerging Markets:
Why Now?
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of Franklin Templeton Investments. 2
Politics and Populism
across Developed Markets
Source: Boris Johnson: http://snappa.static.pressassociation.io/assets/2015/06/17124034/1434541231-dcf7a33bc96928df154a7685e03afadb-600x800.jpg
Donald Trump: https://www.donaldjtrump.com/about
http://snappa.static.pressassociation.io/assets/2015/06/17124034/1434541231-dcf7a33bc96928df154a7685e03afadb-600x800.jpg
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EM Earnings Power And Cash Flows Continue To Improve
Commodity Prices and Exports Supportive of Earnings Turnaround
EM Exports, EM Corporate Earnings and Commodity Prices
Source : ©FactSet Research Systems,MSCI, Bloombergrs. Note: Exports are based on the value of goods exported by developing countries and do not include services. Earnings are based on 12-month f
Commodity prices are based on the Bloomberg Commodity Index. Last Updated: Exports numbers are the latest as of 09/29/2017, The rest are updated as of 12/29/2017
'08 '09 '10 '11 '12 '13 '14 '15 '16 '17
-60
-40
-20
0
20
40
60
80
An
nu
al
C
ha
ng
e
%
Commodity
Exports
Earnings
Growth
12/31/2007 - 12/29/2017
Exports, World, USD - Emerging Economies
MSCI EM (Emerging Markets) - 12 Month Forward Earnings Growth
Bloomberg Commodity Index - Price
3
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of Franklin Templeton Investments.
EM Earnings Power And Cash Flows Continue To Improve
Free Cash Flow Growth, EPS Growth
For illustrative and discussion purposes only. Past performance is not an indicator or a guarantee of future results.
Source: FactSet, BoA Merrill Lynch Global Research, MSCI, IBES estimates. 12 months forward EPS Growth.
Asia ex-Japan Free Cash Flow
2007 – 2018E
0
50
100
150
200
250
300
350
2007 2009 2011 2013 2015 2017E
US
D
bn
EM Earnings Expectations Rising
January 2012 – December 2017
0%
5%
10%
15%
20%
2012 2013 2014 2015 2016 2017
MSCI EM MSCI World
4
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of Franklin Templeton Investments.
EM Valuations
Cheap Relative to DM But Not Historically
5
Source : ©FactSet Research Systems,
MSCI, Developed Markets as represented by the MSCI World ; EM as represented by MSCI EM;
Last Updated:12/29/2017
'08 '09 '10 '11 '12 '13 '14 '15 '16 '17
6
8
10
12
14
16
18
Emerging
Markets:
12.50
Developed
Markets:
17.04
12/31/2007 - 12/29/2017
MSCI EM (Emerging Markets) - Price to Earnings - Next 12 Months - Monthly (Index)
MSCI The World Index - Price to Earnings - Next 12 Months - Monthly (Index)
Source : ©FactSet Research Systems, MSCI, Last Updated: 12/29/2017
'08 '09 '10 '11 '12 '13 '14 '15 '16 '17
-5
0
5
10
15
20
25
30
35
DM EPS
Growth:10.02
EM EPS
Growth:
13.05
12/31/2007 - 12/29/2017
MSCI EM (Emerging Markets) - IBES Aggregates - EPS Growth 12 Month
MSCI World Index - IBES Aggregates - EPS Growth 12 Month
P/E NTM 12 Months EPS Growth
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of Franklin Templeton Investments. 6
EM Fund Flow Cycles
2003 – 2017
EM Equity Fund Flows
2013 – 2017
Emerging Markets: Flows
Flows Accelerating but Remain Muted Relative to History
-50
-25
0
25
50
75
2013 2014 2015 2016 2017
US
D
Bn
0%
5%
10%
15%
20%
25%
30%
0 12 24 36 48 60 72
%
o
f T
ot
al
As
se
ts
No. of weeks
4/9/2003
11/3/2004
3/11/2009
12/21/2011
7/13/2016
For illustrative and discussion purposes only. Past performance is not an indicator or a guarantee of future performance.
Source: Morgan Stanley Research, Citi Research, EPFR Global. As of December 2017.
For distributors/institutional/professional investors use only. The content of the presentation should not be reproduced /distributed to the public without prior approval
of Franklin Templeton Investments.
MSCI EM Currency Index
January 2015 – December 2017
80
85
90
95
100
105
110
0.0%
0.5%
1.0%
1.5%
2.0%
Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17
U.S. Fed Funds Rate (LHS)
MSCI EM Currency Index (RHS)
JPM EM Currency Index (RHS)
Emerging Markets: Fed Impact
Impact on Emerging Markets Currencies Historically Limited
7
90
100
110
120
130
140
150
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
Jun-03 Jun-04 Jun-05 Jun-06
U.S. Fed Funds Rate (LHS)
MSCI EM Currency Index (RHS)
JPM EM Currency Index (RHS)
MSCI EM Currency Index
June 2003 – June 2007
Jun-07
Fed announces
unwinding of QE
For illustrative and discussion purposes only. Past performance is not an indicator or a guarantee of future performance.
Source: FactSet, as of December 2017. See www.franklintempletondatasources.com for additional data provider information.
http://www.franklintempletondatasources.com/
For Professional Investor Use Only. Not for Distribution to Retail Investors. 8
Emerging Markets May Offer Promising Opportunities
Rising Wealth Expected to Fuel Strong Growth Prospects
Consumption by the Middle Class1
(USD Trillions)
For illustrative and discussion purposes only.
1. Source: Brookings Development Indicators, as of June 2016. There is no assurance that any projection, estimate or forecast will be realised.
Past performance is not an indicator or a guarantee of future performance.
Emerging Markets Emerging Asia Developed Markets
193%
Growth Rate
9.5
13.9
20.1
27.9
2015 2020 2025 2030
343%
Growth Rate
4.6
8.0
13.4
20.4
2015 2020 2025 2030
10%
Growth Rate
13.6 14.1 14.6 14.9
2015 2020 2025 2030
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Emerging Markets:
New Economy Rising
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Technology: Secular Long Term Growth
Emerging Markets Most Tech Dominated Index
MSCI EM Index Sector Evolution
January 2007 – December 2017
For illustrative and discussion purposes only. Past performance is not an indicator or a guarantee of future results.
Source: FactSet, MSCI, as of December 2016. 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.
IT Sector Weighting: MSCI Indices
December 2011 vs. December 2017
0
5
10
15
20
25
30
35
40
2007 2009 2011 2013 2015 2017
Energy/Materials Technology Consumer
0
5
10
15
20
25
30
EM USA Japan Europe
IT
S
ec
to
r W
eig
ht
in
g (
%
)
Dec-17 Dec-11
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