Emerging Markets (EM) are “undervalued” and “not understood well”, Templeton Emerging Markets Investment Trust (TEMIT) lead portfolio manager Chetan Sehgal told Money Marketing.
Sehgal has been with Franklin Templeton for 29 years, with seven of those as lead portfolio manager of TEMIT.
Sehgal said: “The [EM] story is yet to be fully told”, but financial advisers can definitely help investors get a better understanding of the asset class.
EMs in many sectors are now “equal or better than developed countries” and unlike the US “where you have a few big winners like the Magnificent 7 stocks, EMs have more wide-ranging companies”.
He also explained China’s role in the EM index is reducing compared to five years ago. In 2019, China represented roughly 50% of the EM index, whereas today it has decreased to 25%.
That being said, China still remains the largest proportion of the EM index.
He added that India and Taiwan have both “performed extremely well” within the EM index. However, a sizable issue within the EM space was Russia’s invasion of Ukraine.
Russia was labelled an EM, but due to the sanctions imposed following the invasion it was removed from the index.
Sehgal added: “Russia coming out of the index was painful, but what most people do not realise is how well other EMs have performed.”
According to the International Monetary Fund (IMF), EM economies generate 65% of global growth.
The MSCI EMs Index has returned 7.45% annualised since launch in December 2000. This is higher than global equities represented by the MSCI World Index, which has returned 5.44%.
TEMIT, meanwhile, has delivered a 8-10% rate of return.
Sehgal explained that geopolitical factors are an issue and concerns surrounding China are “always there”. Nevertheless, “most fears of sanctions are already factored in” within TEMIT.
In total, there are 24 countries in the MSCI EM Index.
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