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Meet the Team

TEMIT is managed by an experienced investment team comprising of the following members:

Chetan Sehgal, CFA

Senior Managing Director, Director of Portfolio Management

Andrew Ness

Portfolio Manager, Franklin Templeton Emerging Markets Equity

Overview

Emerging market (EM) equities rose in the final quarter of 2025. The US Federal Reserve slipped its last interest-rate reduction for the year in December and created an opportune environment for equities globally. For the quarter, the MSCI EM Index returned 4.82% while the MSCI World Index delivered 3.21%, both in net UK-sterling terms.1

Stocks in the emerging Asia region collectively rose.2 Indian equities fared well this quarter, although the pace of outperformance weakened in December as investors locked in profits. Inflation continued to be tame, while the economy reported brisk growth of 8.2% in the second quarter of fiscal year 2026. South Korea’s equity market received support from its automotive companies and its two largest semiconductor firms, SK Hynix and Samsung Electronics (both held in the portfolio). The former came as the United States reduced its tariffs on auto imports, and the latter on strong outlook for memory demand and prices. A global artificial intelligence (AI) rally lent a helping hand to Taiwanese equities, pushing the nation’s equity index ahead. This AI exuberance translated to Taiwan achieving its highest growth in export orders in nearly five years in November as exports of telecommunications and technology products persisted. Chinese equities came under pressure after the Politburo signalled a more restrained approach for its stimulus in 2026.

Equities in the emerging Europe, Middle East and Africa (EMEA) region collectively advanced as well, tracking the general trajectory of global equity markets.3 Volatility in oil prices resulted in a cautious energy outlook and exerted some pressure on Saudi Arabian equities. In South Africa, inflation slowed for the first time in three months in November, bolstering expectations that the central bank will reduce interest rates further in 2026 even with a lower inflation target.

Equities in the emerging Latin America (LatAm) region generally ascended, led by Chilean equities due to higher copper prices.4 Mexico’s central bank slid in a final interest-rate reduction in December, easing its benchmark interest rate to 7%, its lowest level since June 2022. Brazil’s economy contracted in October from a month ago, a tell-tale sign that short-term activity is cooling under tight monetary policy.

Portfolio Changes & Positioning

BYD is a leading electric vehicle (EV) and battery manufacturer in China. The share price has been weak on concerns over weaker near-term volumes in the domestic market. However, we remain optimistic on its vertically integrated EV business model, which has significant scope to gain share in the overseas market. It is also a leading supplier of energy storage systems batteries, which is seeing strong growth in both China and overseas. We therefore took advantage of this share price weakness to strengthen our exposure.

Overall, we increased investments in the consumer discretionary, health care and industrials sectors. In terms of countries, we undertook purchases in the United Arab Emirates, China/Hong Kong and Brazil.

SK Hynix is a South Korean semiconductor company and a maker of memory chips that are used globally across a wide range of solutions. In line with our investment approach, we trimmed our position in SK Hynix on the back of a share price advancement. SK Hynix, however, remains a key portfolio holding as it retains a leadership position in the HBM (high bandwidth memory) market.

By sector, we trimmed our exposure to financials, information technology and communication services. Geographically, we made the biggest sales in Thailand, South Korea and Taiwan.

Positive Contributors

TEMIT’s net asset value returned 7.90% over the quarter, compared to the MSCI EM Index-NR’s result of 4.82%, both in UK-sterling terms.

South Korea-based SK Hynix and Hyundai Motor led contributors. The former, a semiconductor company and a maker of memory chips, rose after the company reported a record quarterly profit for the third quarter of 2025 and guided that their memory chip lineup for 2026 has been sold out. Management also followed up with positive commentary on AI-related demand, with capacity tightness lingering into 2027. Automobile company Hyundai Motor rose on multiple positive developments including reduced tariffs from 25% to 15%, and a partnership with Nvidia (not a portfolio holding) to accelerate innovation in autonomous vehicles. The world’s largest semiconductor foundry Taiwan Semiconductor Manufacturing Company also performed well relatively.

Detractors

The largest detractor was Prosus, a leading global investment company and the largest shareholder of Tencent Holdings, a Chinese technology company. Its share price dipped in tandem with Tencent’s, as the latter moved downwards alongside broader Chinese equities despite a positive set of third-quarter results. Other detractors included a specialist biotechnology contract development and manufacturing organisation WuXi Biologics and Hong Kong–based leading power tools and outdoor power equipment manufacturer Techtronic Industries.

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Outlook

We leave a strong year behind, with EM equities racing ahead of developed market equities in 2025. While a repeat of such exceptional performance may be too optimistic, the outlook for EM equities in 2026 remains constructive. This outlook is underpinned by several supportive themes that continue to drive earnings momentum across the asset class.

Artificial Intelligence Supply Chain
AI will remain a key driver within the broader information technology space, and the structural growth potential of AI continues to underpin the investment case across key EM markets. Importantly, the opportunity set extends beyond the direct semiconductor beneficiaries in Taiwan and Korea. Attractive exposure is also emerging along the AI supply chain—such as electronic manufacturing services, power supply units and printed circuit-board companies.

In parallel, select China-based internet companies are increasingly embedding AI into their ecosystems, potentially leading to cost efficiencies as well as incremental growth on top of traditional e-commerce and advertising models. Leading Chinese internet names are major cloud service providers and should benefit from rising demand for AI-related workloads. They are developing competitive AI models and developing semiconductor chips, positioning themselves to participate more directly in the AI stack.

China’s industrial leadership
The global demand for power continues to rise, a trend accelerated by the energy needs of data centres supporting the AI boom. This has created a surge in demand for related infrastructure, including energy storage batteries and related power equipment. Chinese industrial companies are at the forefront of this trend, delivering growth in both their domestic market and, increasingly, through exports. Similarly, Chinese EV manufacturers are leveraging their technological advantages to gain international market share, a trend that is anticipated to continue throughout 2026.

Policy shifts and domestic reforms
Many EM central banks have continued to ease monetary policy to support domestic demand and balance broader policy objectives, and this trend is expected to persist into 2026.

In China, the anti-involution campaign aims to curb excessive price competition and industrial overcapacity. While it is too early to gauge the success of this initiative, it may begin to shift incentives away from margin-destructive competition, particularly in sectors where policy scrutiny is rising. For well-managed companies, this could reduce the need for defensive spending to protect market share, improving earnings quality and enabling a more rational allocation of resources over time.

In India, consumption-focused policy support has been seen in recent consumption trends. In 2026, the benefits of these reforms should become more evident in corporate earnings.

In Latin America, Brazil is well-positioned to benefit from a more accommodative interest-rate environment in 2026, although upcoming elections could introduce some market volatility. Mexico, meanwhile, continues to be supported by nearshoring dynamics and its strategic proximity to the United States.

Trade, tariffs and resilience
US tariffs have now largely been crystallised with trade agreements with most countries. At time of writing, some EM countries, including Brazil and India, remain in active trade talks with the United States. However, these economies are relatively less reliant on exports than some peers and are therefore somewhat more insulated from direct tariff shocks.

EM equities have already demonstrated resilience by recovering from the initial tariff-related disruptions in 2025, and that adaptability—through supply-chain adjustments, trade rerouting and domestically anchored growth drivers—should continue to support the asset class. 
 

Conclusion
The investment landscape in EMs for 2026 is shaped by compelling long-term themes, including leadership in AI-related supply chains, technology, digitalisation, the premiumisation of consumption, and health care. These structural growth areas, combined with supportive valuations in select parts of the EMs, underpin a constructive outlook for 2026.

The information provided is not a recommendation to purchase, sell, or hold any particular security and is not to be taken as advice. It should not be assumed that any securities transactions were or will be profitable.

  1. Source: MSCI. The MSCI World Index captures large- and mid-capitalisation representation across 23 developed market countries. The MSCI EM Index captures large- and mid-cap representation across 24 EM countries. Indexes are unmanaged and one cannot directly invest in them. They do not include fees, expenses or sales charges. Past performance is not an indicator or guarantee of future results. MSCI makes no warranties and shall have no liability with respect to any MSCI data reproduced herein. No further redistribution or use is permitted. This report is not prepared or endorsed by MSCI. Important data provider notices and terms available at www.franklintempletondatasources.com
  2. As measured by the MSCI EM Asia Index.
  3. As measured by the MSCI EM EMEA Index.
  4. As measured by the MSCI EM Latin America Index.

WHAT ARE THE KEY RISKS?

The value of shares in the Templeton Emerging Markets Investment Trust PLC (TEMIT) and any income received from it can go down as well as up and investors may not get back the full amount invested. There is no guarantee that TEMIT will meet its objective. TEMIT invests in the equity securities of emerging markets companies. Emerging markets have historically been subject to significant price movements, often to a greater extent than more established equity markets. As a result, the share price and net asset value of TEMIT can fluctuate over time. Performance may also be affected by currency fluctuations. TEMIT can borrow to purchase assets for the company; this will magnify any gains or losses made by the company. Shares of TEMIT are bought and sold on stock exchanges, typically, at any given time on any given day, the price you pay for a share will be higher than the price at which you could sell it. In addition, investors should be aware that TEMIT may trade at a discount to its Net Asset Value (NAV) per Share, and such discount may become larger in the future. TEMIT may take charges from the Company’s capital account. While this might allow a larger dividend to be distributed, it may also have the effect of reducing capital. For more details of all the risks applicable to TEMIT, please refer to the Key Information Document, Investor Disclosure Document and the risk section in TEMIT’s Annual Report, which can be downloaded from our website – www.temit.co.uk.
 

IMPORTANT INFORMATION

Past performance is not an indicator or a guarantee of future results. 

This document is intended to be of general interest only and does not constitute legal or tax advice nor is it an offer for shares or invitation to apply for shares of TEMIT. Nothing in this document should be construed as investment advice. Opinions expressed are the author’s at publication date and they are subject to change without prior notice. Given the rapidly changing market environment, Franklin Templeton Investments disclaim responsibility for updating this material. Subscriptions to TEMIT can only be made on the basis of the Key Information Document (“KID”), accompanied by the latest available audited annual report and the latest semi-annual report if published thereafter. Please consult your professional adviser and read the KID before deciding to invest.

An investment in TEMIT entails risks as outlined above. References to particular industries, sectors or companies are for general information and are not necessarily indicative of TEMIT’s holding at any one time. References to indices are made for comparative purposes only and are provided to represent the investment environment existing during the time periods shown. An index is unmanaged, and one cannot invest directly in an index. The performance of the index does not include the deduction of expenses and does not represent the performance of any Franklin Templeton Investments fund.

All MSCI data is provided “as is.” The portfolio described herein is not sponsored or endorsed by MSCI. In no event shall MSCI, its affiliates or any MSCI data provider have any liability of any kind in connection with the MSCI data or the portfolio described herein. Copying or redistributing the MSCI data is strictly prohibited. © 2026 Morningstar, Inc. All rights reserved. You will find more information at www.morningstar.com. Franklin Templeton shall not be liable to any user of this document or to any other person or entity for the inaccuracy of information or any errors or omissions in its contents, regardless of the cause of such inaccuracy, error or omission.

There is no guarantee that TEMIT will achieve its objective. For a free copy of the KID, the annual report and semi-annual report, if published thereafter or for more information contact: Franklin Templeton Investments, Telephone: 0800 305 306, Email: [email protected] or write to us at the address below. Alternatively, the information can be downloaded from our website www.temit.co.uk.

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