Mark Mobius, Executive Chairman, Templeton Emerging Markets Group
Jul 21, 2017 | Source: Moneycontrol.com
Equity Investment Opportunities in India
Challenges in the implementation of the Goods and Services Tax (GST) and profit-taking cooled the Indian market in June, but India’s market remains quite strong year-to-date.Moderating inflation data in June opens the door to potential central-bank easing, and we believe the implementation of the GST should benefit many companies. While India still faces some bureaucratic barriers, we are optimistic about India’s potential and the case for investing there.
Outlook: We believe emerging markets continue to offer superior growth potential compared with developed markets. The long-term trend of increased consumerpenetration and improving affluence, leading to a shift to more premium products and services, should continue to bode well for these markets in the future.
Consumer demand growth is a prominent investment thesis within our portfolios. We look for opportunities in areas relating to consumer products. These include consumerstaples, retailing, and discretionary purchases such as automobiles. We also look for opportunities in services such as consumer finance where we see companies we think can achieve high growth rates and sustainable profits.
Technology is another major investment theme. Many emerging-market companies have become leading players in the adoption and development of technology, and IT hasoutperformed other emerging-market sectors in the second quarter and first half of 2017.
Although we are cautious of the share-price advances in some Internet stocks, we continue to see value in the sector across emerging markets as a whole. Our focus is on earnings sustainability as a result of innovation, dominant platforms or technology.
In addition to Internet companies, which stand to benefit from the move toward more online transactions, we see potential for attractive long-term investment opportunities in many other areas.
Valuations Remain Attractive : In terms of valuations, as of the end of June, the MSCI EM Index had a trailing price-to-earnings ratio (P/E) of 14.9x, a price-to-book value (P/B) of 1.7x and dividend yield of 2.4%. That compares with a P/E of 21.5x, P/B of 2.3x and dividend yield of 2.4% for the MSCI World Index.1
We are of the opinion that the fundamentals of emerging-equities remain attractive. However, we are cautious on certain developments that may generally emanate from anypossible ‚black swan‛ event—that is, a major shock that can’t be predicted.