Covering semiconductors, the exposure to Korea and much more, Chetan Sehgal, Lead Portfolio Manager, reveals the portfolio activity in Q3 2021, the important markets events and his outlook.
Video transcript:
Hi, my name is Chetan Sehgal. I'm the portfolio manager for Templeton Emerging Markets Investment Trust.
In the third quarter of 2021, China was adversely impacted by policy changes, particularly impacting the internet sector. The goal of common prosperity, as well as anti-monopoly meant that large companies, such as Alibaba and Tencent bore the brunt of the adverse policy actions.
Brazil had a steep decline in currency in the third quarter.
On the positive side, countries such as Russia did quite well as a result of higher energy prices, which benefited the economy. For India it was all about recovery from COVID and there is increased optimism in the market, especially because the information technology sector in the country seems to be very buoyant at the present juncture.
We have continued to maintain a large weight to the semiconductor industry. We believe that there are a lot of structural trends favouring the industry and the companies such as TSMC and Samsung, which are the largest two weights in the trust, have sustainable advantages in that industry.
“We have continued to maintain a large weight to the semiconductor industry. We believe that there are a lot of structural trends favouring the industry…”
We have made several changes to our portfolio in the third quarter of 2021. In particular, we reduced our exposure to the large internet names in China, such as Tencent and Alibaba. And we have diversified our exposure to China by adding new companies such as Keshun Waterproofing, Greentown Property Management Services (Greentown Service Group) as well as an increased exposure to some of the smaller names which we have in the trust.
We believe that the diversified approach we have to investment in China is probably the best approach as there is still a lot of policy uncertainty in China.
In India, we have added TCS (Tata Consultancy Services) an Indian IT services company to the portfolio. TCS has a unique blend of both services as well as platforms and products that we believe will help it to do well in the forthcoming years.
“We believe that the diversified approach we have to investment in China is probably the best approach as there is still a lot of policy uncertainty in China.”
We are very confident about the growth outlook for emerging markets. In fact, we have started deploying the leverage in the trust more aggressively in the third quarter of 2021.
Amongst the various individual markets, our largest active overweight is to the Korean market. We find many interesting opportunities in Korea, which offer both sustainable growth as well as a discount to their intrinsic worth.
In China, there has been a reset in growth expectations buy we believe that the valuation adequately reflect this growth reset.
From Brazil – it is a COVID recovery play – and the currency is quite undervalued at this present juncture.
For a market such as Russia, there has been continuous improvement in expectations with the increase in Energy prices – but the valuations continue to be quite cheap, as compared to other markets.
We continue to find a lot of excellent opportunities, within the emerging markets – and we continue to value your support towards the trust. Thank you very much.
“We find many interesting opportunities in Korea, which offer both sustainable growth as well as a discount to their intrinsic worth.”