Templeton Emerging Markets Group has a wide investment universe to cover—tens of thousands of companies in markets on nearly every continent. While we are bottom-up investors, we also take into account big-picture context. Here, I share the team’s overview of what has happened in the emerging-markets universe in the third quarter of 2017, including some key events, milestones and data points to offer some perspective.
Three Things We’re Thinking about Today
- Corporate earnings for emerging-market companies have been showing strong and synchronized growth, driving compelling fundamentals for emerging-market equities. For example, several Chinese internet companies have reported earnings that consistently exceeded market forecasts in recent quarters. In Europe, a rebound in commodity prices has led to positive earnings revisions for metal-and energy-related companies in Russia.
- We view China’s automobile market favorably. The rise of China’s upper middle class has continued to drive luxury car demand in the country, as buyers pay more attention to vehicle performance and product quality. Even though China is the largest market globally for cars, vehicle ownership rates in the country remain quite low in comparison with developed markets, indicating potential for further growth.
- India’s economic growth remains strong in a global context, despite a slight deceleration in the second quarter of 2017. Consumer demand has been a key growth driver over the past few quarters and demand arising from the festival season in October could further support growth in the latter part of 2017.
We remain optimistic about opportunities among emerging-market equities in the current climate, while remaining mindful of potential risks. Tensions on the Korean peninsula have caused some investors to worry. An outbreak of violence could have global ramifications, with a particular impact on North Asia. However, this threat has been in existence for a long time, and most investors familiar with the region have become accustomed to it.
For our part, we continue to proceed with our value-oriented investment process, taking into consideration market sentiment. We believe it is important for investors to be globally diversified through portfolios that include exposure not just to South Korea or Asia but also to other parts of the world.