Emerging Markets Overview
Emerging Markets : Economic Fundamentals
Growth
4
Templeton Emerging Markets
1987 to 2007F
Source: IMF; World Economic Outlook; April 2007
%Emerging vs Developed Countries: GDP Growth
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
87 88 89 90 91 92 93 94 95 96 97 98 99 0 1 2 3 4 5 6E 07F
Developed CountriesEmerging Countries
5
Templeton Emerging Markets
Emerging vs Developed Countries: GDP Growth%
2007F
0.0
2.0
4.0
6.0
8.0
10.0
12.0
Chin
aIn
dia
Arge
ntin
aRu
ssia
Paki
stan
Pola
ndIn
done
sia
Sing
apor
ePh
ilipp
ines
Turk
eyCh
ileM
alay
sia
Hong
Kon
gCz
ech
Sout
h Af
rica
Kore
aBr
azil
Taiw
anTh
aila
ndM
exic
o
U.K
E.U.
Hung
ary
Japa
n
U.S.
Emerging Markets
Developed Market
Source: EIU
Money Supply
7
Templeton Emerging Markets
US, UK, Japan & EU: Money Supply vs MSCI EMF Index
Source: Factset
US$ billion
10/87 10/89 10/91 10/93 10/95 10/97 10/99 10/01 10/03 10/05 10/072,000
4,000
6,000
8,000
10,000
12,000
0
500
1,000
1,500
2,000
2,50009-OCT-1987-09-OCT-2007
MSCI EM (Emerging Markets) - Price with Gross Dividends - Daily Official - USD (Index) (Right)Money supply M1,U.S. + U.K. + Japan + EU (Left)
MSCI EM Index
U.S.+ U.K.+ Japan + EU Money Supply
Fund Flows
9
Templeton Emerging Markets
Cumulative since Jan 1995 to July 2007
0
10
20
30
40
50
60
70
80
90
100
Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07
Emerging Markets : Monthly Equity Fund Flows
Source: EmergingPortfolio.com
US$ billion
*- Covers funds registered for sale in most major developed market jurisdictions and offshore domiciles, including USA, UK, Canada, Luxembourg, Switzerland, Australia, Hong Kong, Channel Islands, Germany, Austria, France and many others; includes all emerging markets funds, not limited to just emerging markets funds
Inflation
11
Templeton Emerging Markets
Emerging Markets : Inflation
Source: Factset
%
'88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '070
10
20
30
40
50
60
70
80
90
100 30-OCT-1987-28-SEP-2007Cpi % Change Percent Per Annum - Developing Countries
Foreign Exchange Reserves
13
Templeton Emerging Markets
1199
278244
192
139137
92
71
48
361
68
49
31
24
149
76
40
26
1815
893
56
0 200 400 600 800 1000 1200 1400
ChinaJapan
RussiaTaiwan
South KoreaIndia
BrazilHong KongSingapore
MalaysiaMexico
ThailandTurkey
United StatesPoland
IndonesiaArgentina
Czech RepublicSouth Africa
HungaryPeruChile
Emerging AsiaRest of Emerging MarketsLatin AmericaDeveloped
March 2007 US$ bn
Source : EIU; IMF
Emerging vs Developed Markets: Foreign Reserves
Confidence
15
Templeton Emerging Markets
Emerging Markets :Yield Spreads vs Stock Market Index
Source : Factset *- Emerging Markets Bond Yield Spreads Over US Treasuries
Basis Point Index
MSCI EM Index
EM Spread10/02 10/03 10/04 10/05 10/06 10/07
100
200
300
400
500
600
700
800
900
1,000
1,100
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
2,20009-OCT-2002-09-OCT-2007JP Morgan EMBI+ - Index Spread (Basis Points) - Emerging Markets Indices (Left)MSCI EM (Emerging Markets) - Price with Gross Dividends - Daily Official - USD (Index) (Right)
16
Templeton Emerging Markets
Source: Markit; Macquaire
Emerging Markets Vs U.S Corporate Bonds :Yield Spreads Over U.S. Treasuries
10/02 10/03 10/04 10/05 10/06 10/070
200
400
600
800
1,000
1,200
09-OCT-2002-09-OCT-2007JP Morgan EMBI+ - Index Spread (Basis Points) - Emerging Markets IndicesUS Coporates BB Spread over US TreasuriesUS Coporates BBB Spread over US Treasuries
3 Cs THEMESConvergence
Consumers
Commodities
Convergence
Mergers & Acquisitions
20
Templeton Emerging Markets
DateAnnounced Acquiror Name
Acquiror Nation Target Name
TargetNation
Value ofTransaction($mil)
2006 Tata Steel India Corus Group PLC U.K. 16,4002006 Cemex SAB de CV Mexico Rinker Group Ltd Australia 15,4332004 Ambev Brazil John Labatt Ltd Canada 7,7582005 Teva Pharma Inds Ltd Israel IVAX Corp U.S. 7,3672006 Vimpelcom OJSC Russia ZAO Kyivstar GSM Ukraine 5,4562006 Sinopec Corp Qingdao Br,China China OAO Udmurtneft Russia 3,5002006 Tenaris SA Argentina Maverick Tube Corp U.S. 3,0962006 Cia Vale do Rio Doce SA Brazil Inco Ltd Canada 2,3162007 Tenaris SA Argentina Hydril Co LP U.S. 2,2122005 Lukoil Overseas Holding Ltd Russia Nelson Resources Ltd U.K. 2,0002005 Bank Polska Kasa Opieki SA Poland Bank BPH SA Poland 1,9332005 Doosan Heavy Inds & Constr Co South Korea Daewoo Heavy Industries & Mach South Korea 1,8282004 Lenovo Group Ltd Hong Kong IBM Corp-Personal Computing U.S. 1,7502006 Sadia SA Brazil Perdigao SA Brazil 1,7022004 OAO Gazprom Russia Sevmorneftegaz Russia 1,7002005 Alfa Group Russia Turkcell Iletisim Hizmetleri Turkey 1,6022005 TPSA Poland PTK Centertel SP zoo Poland 1,5072006 PKN ORLEN Poland Mazeikiu Nafta Lithuania 1,501
Some Major Mergers and Acquisitions Done by Emerging Market Companies
Source: Thomson
Trade Convergence
22
Templeton Emerging Markets
'99 '00 '01 '02 '03 '04 '05 '06 '074%
6%
8%
10%
12%
14%
16%
18%
20%
22%
24%31-MAR-1999-28-SEP-2007
Asian Exports To US /Total ExportsAsian Exports To China /Total Exports
USUS
ChinaChina
* data Smoothed by 12-mths moving average; Includes Hong Kong, Taiwan, South Korea, Singapore, Malaysia, Thailand and the Philippines
Asian Export Shares to U.S. and China
Source: Factset
Exports /Total Exports
23
Templeton Emerging Markets
01/99 01/00 01/01 01/02 01/03 01/04 01/05 01/06 01/070%
5%
10%
15%
20%
25%
30% 29-JAN-1999-28-SEP-2007
Taiwan's Exports To China / Total ExportsTaiwan's Exports To US / Total Exports
US
China
Exports /Total Exports
Source: Factset
Taiwans Export Shares to U.S. and China
24
Templeton Emerging Markets
01/99 01/00 01/01 01/02 01/03 01/04 01/05 01/06 01/07
6%
8%
10%
12%
14%
16%
18%
20%
22%
24% 29-JAN-1999-28-SEP-2007
(Korea's Exports To China / Total ExportsKorea's Exports To US / Total Exports
US
China
Exports /Total Exports
Source: Factset
Koreas Export Shares to U.S. and China
Consumers
26
Templeton Emerging Markets
Million2006
0
200
400
600
800
1,000
1,200
1,400
People'sRepublic of
China
India EU US Brazil Russia Japan Korea Taipei,China
Developed Countries
Selected Emerging Countries
Source: EIU
Emerging vs Developed Countries: Population
27
Templeton Emerging Markets
01/81 09/83 05/86 02/89 10/91 07/94 03/97 11/99 08/02 04/05 12/07
-5
0
5
10
15
20
1.1
1.2
1.3
1.4
1.5
1.6
1.7
1.8
1.9
2
2.131-DEC-1981-31-DEC-2007(% 1YR) Nominal GDP (US$) - Developing countries (Left)Population (% change pa) - Developing countries (Right)
Emerging Markets : GDP* Vs Population Growth Rate%
* Shown as nominal GDP Growth RateSource : EIU
Population
GDP Growth
28
Templeton Emerging Markets
50%
25%
0%
10%
20%
30%
40%
50%
60%
Emerging Markets Developed Markets
2001-2005
Source : EIU * - GPD Per Capita Growth for the5 year period from 2001 to 2005
Emerging Vs Developed Markets : GDP Per Capita Growth
29
Templeton Emerging Markets
Cellular Phone Subscribers
Millions
Source :ML; ITU
102 88 83 7150 41
481
103
239
162 155
0
100
200
300
400
500
600
China US India Russia Brazil Japan Germany Italy UK France SouthKorea
Q1 2007
Commodities
31
Templeton Emerging Markets
Oil Prices - EM Index vs Crude Oil
Source:Factset01/88 01/90 01/92 01/94 01/96 01/98 01/00 01/02 01/04 01/060
500
1,000
1,500
2,000
0
10
20
30
40
50
60
70
80
90
01-JAN-1988-05-OCT-2007MSC EM Total Return Price Index (Left)Energy Oil Brent Crude F
