The Dutch pension asset manager's Asia Pacific head of real estate says his team has just had one of its busiest years ever and that 2021 is looking similarly promising.
MobiusÆs team manages the emerging market portfolios for its parent, Franklin Templeton Investments. The team is made up of 39 analysts spread across 15 markets. Worldwide, Templeton manages around $430 billion, of which about 20% is invested in Asia.
He shares with AsianInvestor his outlook for emerging market equities.
What is your weighting for emerging market equities within a global equities portfolio?
The weighting of our global group in emerging markets varies between 15% to 20% depending on the particular fund. The reason for that is growth and value. There are many emerging market stocks that are growing faster and are now trading at bargain prices.
Have you made any significant changes to your asset allocation in terms of markets or sectors in the past few months?
We have not made significant changes in the asset allocation. Our turnover is quite low and thus such changes are not significant. The overall long-term trend has been to focus on consumer stocks and commodity stocks. Consumer stocks because of the higher per capita income growth that is taking place in emerging markets. Commodity stocks because they have declined significantly below their intrinsic worth and we see the global demand for commodities to continue its long-term growth.
How will flight to safety continue to affect emerging market equities?
The flight to US Treasuries and thus US dollars has resulted in the selling of almost every other investment category including emerging market stocks. The perception of risk in emerging markets is now beginning to shift as investors realize that emerging markets have become net creditors with that vast holdings of foreign exchange reserves, emerging markets continue to show much high economic growth compared to the developed countries and the debt levels of emerging market countries is lower than that of developed countries.
What is your outlook for emerging market equities in the coming 12 months?
Since emerging market equities are very undervalued and have more attractive multiples than other markets, I expect them to outperform.
What are the opportunities available in emerging market equities at the moment?
The opportunities abound in almost every emerging market in the world.
Which particular emerging markets do you favour?
We do not favour any particular market. Our investments are driven by stock selection and we are finding good stocks everywhere.
Which emerging markets will you be avoiding in the coming months?
We will only avoid those markets where there are risks of foreign exchange controls where we are unable to move money in and out, such as Venezuela.
Within emerging markets, which sectors are you bullish over?
Commodities, because the long-term trend is intact for continued high demand. Consumers, because of growing per capita income in emerging markets.
Within emerging markets, which sectors are you bearish about?
We don't have any bearish sectors since we are finding opportunities in all sectors.
What are the biggest challenges in finding suitable investments in emerging market equities under the current market conditions?
Liquidity is probably the biggest challenge. There are many great companies where the trading turnover is not high. For that reason we have started specific funds to invest in illiquid securities: the Templeton Small Cap Fund, The Templeton Frontier Fund and our private equity fund: Templeton Strategic Emerging Markets Fund.
How much is your AUM in emerging market equities?
Approximately $20 billion
The December/January edition of AsianInvestor magazine contains a feature on emerging market equities.
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