Writing in the interim management statement for the Templeton Emerging Markets Investment Trust, Mobius said: “Stable global economic growth provides a benign backdrop for emerging markets while governments across Asia and elsewhere are bringing forward reform programmes aimed at making economies more responsive to market signals and less dominated by political imperatives.”
In addition, he said, the prospect of lower trade barriers in a number of counties could provide a boost to long-term economic growth to a number of countries and improve the profitability of many emerging market companies.
That said, while the overall trend has been positive, Mobius was quick to point out that volatility within the sector was higher than in the developed world, adding: “Taking a long-term perspective, such short-term price movements can open up attractive opportunities.”
Countries like Russia and Turkey saw sharp market falls followed by dramatic recoveries, during the period, he said, while India has seen a strong rally from late 2013 lows.
“In our opinion, valuations of emerging markets in general, and select individual stocks even more so, remain below the levels suggested by our assessment of their longer-term potential,” he said.
Over the course of the second quarter, the MSCI Emerging Markets Index produced a total return of 4.0% in UK sterling terms, the trust said, one the back of “fading concerns about the impact of a reduction in US quantitative easing on emerging markets, declining geopolitical risks, expectations of reforms and better policy-making, implementation of stimulus measures as well as stabilisation in Chinese macroeconomic data”
Over the three months to end June 2014, TEMIT’s net asset value rose 4.8% to 620.3 pence per share.During the period, the performance of the fund was helped by good stock selection and an overweight position in energy, the trust said.
“Geographically, good stock selection in China was the largest contributor to relative performance. Stock selection and an overweight position in India also had a positive impact. Overweight exposures to Thailand, Pakistan and Turkey further contributed,” it said.
Adding: “In contrast, major stock detractors included overweight positions in Astra International in Indonesia, Buenaventura in Peru and China International Marine Containers in Hong Kong/China.”
