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Marcus Wayerer, Franklin Templeton
Marcus Wayerer, Franklin Templeton

Franklin Templeton’s emerging markets outlook  

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Franklin Templeton says that emerging markets are navigating a tricky environment at the moment, due to factors such as the US general election in November this year.    

But there are also opportunities, as Marcus Weyerer, senior ETF investment strategist, EMEA, says: “We see emerging markets, particularly Asia, as a growth hub currently. Growth is quite hard to come by, especially in some developed markets, so from that perspective, I believe emerging markets are well-positioned, although there are of course some risks.”

“China is obviously the biggest emerging market, and there are two factors that give us reasons for optimism about China.  Firstly, it revived its ‘national team’ earlier this year, comprising government, state-owned enterprises and the private sector, tasked with making a concerted effort to stabilise financial markets. “

“The other was the recent announcement of a new support package for the real-estate sector. It’s not the first, but this one is more significant because it’s bigger. It also includes funding for local governments to buy unsold flats, so there is a bit more support for the sector than we have seen in the past.”

There is more to consider, however, says Weyerer. “It demonstrates the urgent needs for the government to stabilise  the real-estate sector though investors are still looking for more clarity on related policies”. 

Reflecting on the US election this year and the potential impact this could have on US/China relations, Weyerer says: “When President Biden won the last election, it was thought that he might be more lenient towards China. But this has not been the case. Regardless of who wins, I  think the relationship with China after the election may still remain challenging.” 

Looking at the reasons why investors are allocating to emerging markets – and specifically to ETFs, Lotfi Ladjemi, ETF distribution, UK, says: “If you look at the growth in developed markets, they do not have the same trajectory as some of the emerging markets and investors are trying to capture some of this growth.

“Also, investors are looking to diversify, for instance, if they might have large holdings in US equities and are looking to complement that.

“Emerging markets are often overlooked in global portfolios. This underrepresentation offers a strategic opportunity for investors looking to capitalise on growth and diversification. With their increasing share of global GDP and market capitalisation, emerging markets are becoming more influential and important in the global economy.

“Also, historically investors have tended to allocate to emerging markets as one region. However, we prefer disaggregating emerging markets. That means not looking at them as one region or one single growth driver, but taking into consideration that the individual countries all have their own different political regimes, macro economies, growth drivers, population trends and their own demographics.”

Summing up, he says: “Looking at the individual countries and taking more of a comprehensive view on each is, we think, a more prudent way of looking at emerging markets.” 

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