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A New Blueprint for China's Development
Chinas government set out its plans for the rest of the decade in a document called "The Decision on Major Issues Concerning Comprehensively Deepening Reforms." Known as "The Decision," it emerged from the Third Plenary Session of the 18th Communist Party of China Central Committee, which took place in early November. The document set out a series of planned reforms that assigned a more central role to markets as President Xi Jinpings administration seeks to maintain Chinas enviable record of long-term growth.
Small (Cap) but Mighty
Despite a number of economic and political headwinds in 2013, US stocks have powered ahead, and not just the large-cap names that equity investors tend to gravitate toward during times of uncertainty. Small-cap stocks have also been looking pretty mighty overall this year. Michael McCarthy, portfolio manager for Franklin Small Cap Growth Fund, believes there are still reasons to be bullish in 2014, although careful stock selection could be even more important after 2013s small-cap run.
Going Against the Grain, Again
Going against the grain is never easy, particularly when it comes to investing. But if you dont take the risk of moving out of the crowd and taking a different path, you cant really stand out. Templeton has focused on bottom-up value investing, which often puts it at odds with the broader market consensus. We go back in history to describe how the strategy has persevered through different market cycles, and why the Templeton team has been going against the grain by investing in Europe at a time when other investors had lost faith.
Patience in Asia
Investing in a multitude of markets and companies as we do within the Templeton Emerging Markets Group means that at any given point in time it may appear to some that they are underperforming or outperforming any particular benchmark index or market. Such is the nature of global financial markets. Of course, wed like all of our investments to go straight up, but at the same time continually like to find new bargains for investors.
Shifting Global Fortunes
Most investors, particularly those who live in developed markets, probably arent aware of the influence emerging markets have on the global economy. Im not just talking about China or just about governments. More and more large corporations are headquartered in emerging markets, a trend that I expect to continue. In addition, more of those companies that are located in emerging markets are also joining the ranks of the top companies in the world. In fact, some might be surprised to hear that some of the worlds largest initial public offerings (IPOs) have been in emerging m
Dividend Season Scorecard
As consumers gear up for the upcoming holiday shopping season, many investors in individual equities are eagerly anticipating another season that, instead of draining their wallets, might actually fatten them-dividend season. Don Taylor, portfolio manager of Franklin Rising Dividends Fund, is on the lookout for companies which not only have a track record of paying regular dividends, but increasing them. Here are some of Taylors thoughts on the early dividend season scorecard.
Great Rotation? How About Selective Rotation?
A few months ago there was a lot of buzz about a so-called Great Rotation, used to describe an investor exodus from fixed income and into equities, conjuring up images of a massive herd of wildebeest on the African plain racing for greener pastures. Oftentimes, when investors react to the market with a herd mentality, they can wind up losing sight of where they are going, and why. Eric Takaha, senior vice president and portfolio manager for Franklin Strategic Income Fund, says what hes seen is more of a selective rotation.
No Man is an Island
When your territory spans hundreds of countries on just about every continent and time zone, the importance of teamwork cannot be underestimated. I am extremely fortunate to have the support of a tremendous team of currently 90 professionals in the Templeton Emerging Markets Group, including 52 analysts and portfolio managers, spanning 26 countries and speaking 24 languages. I couldnt do what I do without them! For the past 25 years, Ive had the pleasure of working with Tom Wu, whose research responsibilities include companies in Hong Kong and the Philippines, as well as the bank
Fed in Holding Pattern, but for How Long?
At its October 29-30 policy meeting, the US Federal Reserve (Fed) again put off the so-called tapering of its $85 billion-a-month asset purchase plan, now over a year old, until some future date. In an official statement released at the conclusion of the meeting, the Fed cited fiscal policy issues as restraining growth and said it will continue its quantitative easing program (known as QE) until the job market improves substantially.
When Small is Big
Theres a popular saying in the US, good things come in small packages, which is generally a statement about gifts of jewelry. My team and I find this saying can apply to the investment world, too, as we often find companies that are small in size, but which may have big long-term potential.
Fed Tapering Could Be Off The Table Until 2014
Sometimes, hindsight is insight. The mystery of why the Federal Reserve didnt start pulling back or tapering its prolonged quantitative easing program at its September policy meeting seems more clear now that weve experienced the fallout from the fraying of US fiscal policy soon thereafter, including a 16-day government shutdown in October. Given that the Congressional agreement reached in October only funds the government through January 15 and extends the debt ceiling through February 7, more political grandstandingand economic consequencescould lie ahead.
Africa's Glass With Attitude
Africa has been an area of interest to our team, for many reasons. One might say Africas biggest asset is its youthful population. With a median age of under 20 in many countries today, that means a very high portion of Africas population is dependent on the adult workforce. Tomorrow, however, it means that the workforce will be massive, and the ratio of dependents to workers (the dependency ratio) could be among the lowest in the world. This huge and youthful population is a key rationale for our interest there.
Could US Issues Lead Investors to Emerging Markets?
The US government had been shuttered for more than two weeks, and investors around the world, including those in emerging markets, have been watching the impasse and beginning to plan in the event of a default of US government debt. Late Wednesday, the US Congress agreed to a short-term extension of the debt ceiling until February and set the stage for the government to reopen. However, a definitive, long-term solution to the nations debt issues was still not reached and we could see a repeat of the political dysfunction.
Politics Secondary to US Equity Fundamentals
Its easy to get caught up in the tense drama surrounding the government shutdown and the debt ceiling squabble between Congressional Republicans and Democrats, but Grant Bowers, portfolio manager of Franklin Growth Opportunities Fund, maintains that looking beyond the political posturing and focusing instead on US corporate fundamentals is his preferred approach. Read on for more from Bowers on how he views the issues at hand, and why, even in the face of another political showdown in the Capitol, he thinks the US still presents a strong investment case.
Is the Pump Primed for Emerging Markets Investors?
The vulnerabilitiesor rather, perceived vulnerabilitiesof emerging markets have been the focus of heightened discussions over the past few months. Concerns about the health of emerging markets came on the heels of political upheavals in Egypt, economic deceleration in China and protest demonstrations in Brazil and Turkey this summer.
Much Ado About Fed Tapering
In the past few months, the global markets seem to have been fixated on the US Federal Reserves words and actions (or lack thereof). Will the Fed wind down its longstanding quantitative easing (QE) program, and when? Will the money tap dry up, and, with it, global liquidity? In more recent days, US markets in particular have been focused on a looming government shutdown, adding a dose of uncertaintyand volatility.
Bridging the Gap: Global Listed Infrastructure
Simply spreading your investments across a smattering of asset classes with the idea that diversification should automatically produce a positive result is an approach thats maybe a little too similar to a roll of the dice. For investors hunting for classes to diversify into, Wilson Magee, Director of Global Real Estate and Infrastructure Securities, Franklin Templeton Real Asset Advisors, and co-manager of Franklin Global Listed Infrastructure Fund, has one word: infrastructure.
Q&A: Emerging Markets Powerhouses China and India
Given their heft in the emerging markets world, China and India are among the countries I get asked most often about, particularly when they show market distress signals like economic slowing.This past week, the Templeton emerging markets team and I have been in China as part of a large research trip, doing further analysis on the market and key company prospects. I thought it would present a good opportunity to share a few of my answers to recent questions on both China and India.
Europe's Fragile Recovery
Investors have tentatively begun to buy into the European recovery story, but remain fearful of the regions fragility. A few bits of upbeat economic data recently have provided grounds for optimism, and the European Central Banks continued commitment to holding the Eurozone together has boosted confidence. Tucker Scott, portfolio manager forTempleton Foreign Fund, still sees a few economic roadblocks in Europe but also plenty of progress. He shares where hes finding signs of strength and investment opportunities.
Dividends Matter
Many people think of emerging market stocks as pure growth plays, and may not realize that there is a separate potential benefitdividendsthat can also be available to investors in these markets. A prolonged period of easy monetary policies in many developed nations (particularly the US) has left income-seeking investors searching for alternatives to traditional fixed income, including dividend-paying stocks. Many investors may not realize dividends arent just a developed-market phenomenon.
Have Emerging Markets Gotten Oversold?
At Templeton, weve repeatedly championed our value-driven philosophy by frequently buying at times others are most pessimistic. This is not easy to do, even for seasoned market veterans. During the past few months, emerging markets have been subject to such pessimism. These periods of short-term volatility are certainly not new to us, and dont change our long-term conviction of the potential emerging markets hold.
Why We Still Like China
When China, the worlds second-largest economy and an engine of global growth, sneezes many other markets catch colds. A spike in the countrys short-term lending rate in June gave some investors the sniffles at least temporarily, while others have turned bearish on China amid concerns growth rates this year could be under the weather. However, many investors may be overlooking some powerful macro-economic long-term shifts taking place in the economy that could ultimately improve Chinas bill of health.
Once-a-Generation European Opportunity?
Sir Johns contrarian conviction was so strong, that in 1939 when WWII had investors fleeing the markets, he bought every stock on the New York Stock Exchange trading under a dollar. Cindy Sweeting, Director of Portfolio Management at Templeton Global Equity Group, espouses Sir Johns contrarian approach, although as a more selective bottom-up stock-picker today. As the markets have bumped along recently she has also echoed his money-where-your-mouth-is action, avoiding the same trend plays everyone else is making by the doing the far more difficult work of going against the grain.
A Biotech and Pharmaceutical RX
When you visit your doctor or reach into your medicine cabinet for something to cure your ills, you probably dont think much about the amount of science and innovation packed into that little pill. Evan McCulloch, portfolio manager of Franklin Biotechnology Discovery Fund, has his eye on products in the healthcare, biotechnology and pharmaceutical sectors that have the potential to change the world of medicine. He says new product cycles and therapies have made it a particularly exciting time for the sector, and potentially for investors.
The Shariah Appeal
For some, the only guiding rule they have for investing is to grow their assets. For others, the rules are more complicated. Specifically in the Muslim world, demand has been growing for investments compliant with Islamic law (Sharia or Shariah) which adhere to a set of religious beliefs and principles. Considering the global Muslim population is expected to grow to 2.2 billion by 2030, representing more than a third of the worlds total population1, I expect rising demand for Shariah-compliant investment vehicles to continue.
Wedding Bells in Romania
I was invited to attend the wedding of one of our Romanian staff in June, and I jumped at the opportunity to celebrate with the happy couple, visit a different part of Romania, and talk to locals about life there. The celebration represented a microcosm of the juxtaposition of old and new in Romania, and this is similar for investors there as progress continues toward market reform.
Retirement: The Vacation of a Lifetime
Most of us plan for our vacations with giddy anticipation. We pore over glossy travel magazines and surf web sites for the perfect place to pursue our passions, or to just put our feet up and relax. And, if were responsible, we save our pennies, sometimes years in advance, to make our dream a reality. But when it comes to the ultimate vacation retirement many people are far less prepared. You probably have a good idea of how to finance a weeks vacation, but do you have a viable plan for a vacation that can last decades?
Fixed Income Fed Insight: It's All About Employment
We can try to guess what the Fed is thinking, but ultimately the Fed is driven by inflation and the labor markets. With inflation seemingly under control, its really the labor markets that dominate. So if you want to know what the Feds going to be doing, look at the labor markets how many jobs we create each month and, most importantly, the unemployment rate.
European Equities: Beyond the Headlines
Its fairly easy for investors to find reasons to shun European equities. While struggles in some Eurozone periphery countries continue to make eye-catching headlines, the broader story of Europe is far less fatalistic, according to Mutual Series Executive Vice President Philippe Brugere-Trelat, who manages the Mutual European Fund, Mutual Global Discovery Fund and Mutual International Fund. When it comes to Europe, he says one shouldnt throw out the baby with the bathwater, so to speak.
Brazilians Demonstrate Their Right to be Heard
Brazilians have demonstrated their right to be heard. The unprecedented chain of events that started with complaints about inflation (bus and subway tariffs) has led to mass protests over corruption, lack of public services, and taxes. As a result of the tension and uncertainty in the past few weeks, some investors have lost confidence in Brazils market. After talking with our analysts on the ground there I wanted to share some perspective on the situation.
Welcome Back Greece to the High-Potential World of Emerging Markets
In June, major international equity index provider MSCI confirmed Greeces sojourn among the ranks of developed markets would end later this year as it will become the first-ever country to lose its developed market status in the MSCI universe. Interestingly, Greece was classified as emerging when I started with the Templeton Emerging Markets Group in 1987, and while the recent news might conjure up images of a significant turn for the worse for the countrys economic fortunes, MSCIs explanation for Greeces reclassification was actually mor
Hasenstab: Emerging Out of the Consensus Trade
Just when is a potential long-term reward worth the short-term risk? Investors are often most focused on the short-term pain of a particular event (hard to blame them), losing sight of possible outcomes farther out into the future. That could partially explain whats going on in the emerging markets right now, at least according to Michael Hasenstab, co-director of the International Bond Department, Franklin Templeton Fixed Income Group.
Taper Tantrum Grips Muni Market
The markets have been in fits since mid-May, when Federal Ben Bernanke planted the seed that the central banks prolonged asset buying program would start winding down. Many investors were gripped with irrational panic, a so-called taper tantrum that roiled equity and fixed income markets. Rafael Costas, senior vice president and co-director of our municipal bond department, believes the early summer swoon sweeping the muni markets is unfounded and should be temporary, but the core reason for investing in the sector remains solid: long-term tax-free income potential.
Riding Out Recent Volatility
Major central bank policy turns are naturally going to cause some market dislocations. Hasenstab says its pretty clear the Fed couldnt continue printing money forever, and while some investors are panicking about what the end of the Feds easy money policy will mean, Fed tapering doesnt equate to Fed tightening.
Turmoil Shouldn't Derail Turkey
In 2012, Turkeys stock market rose more than 50%, posting one of the strongest performances of any global equity market last year. However, recent news of protests sweeping the nation has started scaring off some investors, at least in the short term. We consider turmoil to often be a natural part of change and development, and these short-term political disturbances likely wont be the last. Ive invited my colleague Carlos von Hardenberg, Managing Director, Turkey, based in Istanbul, to share some local insight.
Rates, Dividends and The Laws of Gravity
The laws of gravity may dictate that what goes up must come down, but interest rates seem to have their own converse course of action what goes down eventually will go up. Although it seems like interest rates can stay stuck in low gear for years, (decades even, in the case of Japan) eventually they will creep higher, and talk is heating up about the timing and magnitude of such creep in the US. As the portfolio manager of Franklin Rising Dividends Fund, Don Taylor was quick to comment that higher interest rates dont mean all dividend-paying stocks are doomed.
The Fear Factor in US Equities
Fear is a powerful motivator. Whether its a saber-toothed tiger or investment risks, its hard to stay calm when confronted with a perceived threat. Fear of a 2008 2009 downturn repeat, even in spite of strong performance in the US equity market in the first half of the year, has kept many investors sidelined. Grant Bowers believes fear itself could be the biggest issue holding back many investors right now, noting that in his view, short-term volatility aside, the recent US market rally is based on supportive fundamentals which he thinks should have staying power.
The Best Time to Invest
I frequently speak at investment conferences around the world, and get questions ranging from my outlook for a particular market to highly sophisticated investment concepts. One seemingly simple question asked by a young lady years ago at a conference in Canada which I attended with the founder of Templeton Investments, the late Sir John Templeton, was particularly timeless. She asked: Ive just inherited some money from my grandfather. When is the best time for me to invest it?
Silver Lining: Fed's Tapering Signals Stronger Economy
The Federal Reserves warning that it planned to scale back purchases of Treasuries sparked a storm on Wall Street, bringing instability to what had been a pleasant May in the US markets. Almost lost in the noise, however, is a silver lining: the Fed thinks the economy may be healthy enough to fly on its own.
Emerging Markets Mid-Year Pulse Check
Global economic growth hasnt been terribly inspiring so far in the first half of the year, but many investors have nevertheless been inspired to pour more assets into the equity markets, some of which have surged to record highs. As we hit the mid-year point, now seems like a good time to take a pulse check of emerging markets and assess our prognosis.
Taking a Bite of Values
In the midst of a spring stock market surge sweeping some spots on the global mapnotably the USsome investors have been left scratching their heads, wondering just what it is that the equity market is celebrating. True, the US economy has been improving in some areas, but is it enough to justify the hooplaand keep the market from back-sliding at the first hint of trouble? And, are there any values to be had in this environment? Peter Langerman believes much of todays US market euphoria is actually rational because its based on improving fundamentals, and yes, there are values to
China's IPO Drought: Will it Lift?
Following a flood of initial public offerings (IPOs) that lasted several years, Chinas local A-share market has been in an IPO drought since late last year. There is some speculation Chinas regulatory body, the China Securities Regulatory Commission (CSRC), may allow some IPOs to trickle back into the market this year, but we dont yet know exactly when or at what volume. Ive invited my colleague Eddie Chow to share his perspective on why IPO issuance has been halted in Chinas local market, and where we see potential opportunities in the current environment.
Are Equity Investors Pushing the Gas Pedal Too Hard?
Whatever previous reticence investors may have had about equities last year seems to have evaporated and, with remarkable speed, turned into fear over having missed the equity rally. Some major market averages have accelerated at a pace some say is reckless, so as we head toward the mid-point of the year, Norm Boersma, CFA, chief investment officer of Templeton Global Equity Group, takes a look at reasons investors might continue to push the gas pedalor tap the brakes.
Investors Living in Emerging Markets are a Bullish Bunch!
Part of my job involves putting myself out on a limb at times, and I have taken the risk of being subject to contrary (sometimes enthusiastically so) viewpoints. Ive even been accused of being too optimistic about emerging markets, perhaps partly because my views often represent a stark contrast to dramatic news headlines. So when I took a look at the findings of Franklin Templeton Investments 2013 Global Investor Sentiment Survey (GISS),1 I was pleased to discover my longstanding optimism about emerging markets seems to be spreading among investors.
Saving for College: A Family Affair
The language of personal finance isnt especially racy, but debt certainly has taken on the negative tone of other four-letter words. Even so, with college costs on the rise and many parents feeling especially pinched in this challenging economic environment, student loans rather than college savings have become the solution for many.
China's Building, but Will They Come? Ghost Cities
Some of you may have heard or read about the current state of the real estate market in China, often covered in a sensationalistic way, with talk of ghost cities and bubbles ready to burst and so forth. These types of reports can cause quite a jolt in the market, which is what we saw happen, probably not coincidentally, after a popular US television newsmagazine aired a somewhat negative report in March. But as Ive said many times before, theres often more to a story; important parts can end up on the cutting room floor.
Europe (and Italy's Rivals) Appear on Road to Recovery
When Europes debt disease spread to Cyprus, accompanied by bank runs and public unrest, some doubted the European Central Banks (ECB) ability to contain the contagion. And, even more recently, Slovenia turned up sick, warning of escalating debt problems and faltering banks. But with the setbacks have come some surprising steps forward, too, including progress in Italy, which recently formed a new coalition government.
Looking at Leverage Outside the Box
Yield-seeking investors have been boxed in by the near-zero US rate environment, and it seems like there are few ways out. But for those willing to set aside preconceived ideas about the word leverage, the lesser-known leveraged loans category may be an alternative to consider in the credit space. Mark Boyadjian, senior vice president and director of our Franklin Floating Rate Debt Group, spoke to us recently about what these often-misunderstood vehicles are and what yield-seeking investors need to know before they take the plunge.
Growth From the Ground up in Iskandar
Our emerging markets team isnt too keen on following crowds. Part and parcel of Templetons contrarian approach is traveling to places others arent, and thinking about the long-term potential in specific industries and companies that may not be on others radar screens. One place weve had our eye on for several years now is Iskandar, Malaysia, which has recently been attracting more investor attention. I think it could be viewed as an example of the potential we see in Southeast Asia.
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