Emerging markets still provide investment opportunities: Franklin Templeton

KUALA LUMPUR: The Malaysian equity market, along with other emerging markets, still provides investment opportunities, despite negative trade sentiments and the declining ringgit, Templeton Emerging Markets and Franklin Local Asset Management managing director and chief investment officer Stephen Dover said.
Valuations in the equity market are at an average 10-year low.
He said the depreciation of the Malaysian currency is beneficial for equity investors as it has become much cheaper to invest.
“We see the currency situation as an opportunity to enter into a market from an equity perspective. It is definitely an inexpensive market for an equity investor from outside to provide opportunities for us,”he told reporters at a media briefing on the emerging market outlook 2017 yesterday.
Similar to the case of Malaysia, he said other emerging markets are also appearing more attractive for investors due to their depreciating currencies as compared to the dollar, providing a cushion for investors.
The currencies of most of the emerging markets are low and have already been under-weighed as it has already gone through a currency decline and is unlikely to fall further, which is a positive sign according to Dover, because the opportunity for growth is greater than a risk of further depreciation.
“Big investors seem to be showing interest in the Asean as they seem to provide long term opportunities,” he added.
Dover said earnings growth in emerging markets, which will be relatively better than developed markets, will make valuations go down further and spur investor interest.
The development of small capital companies in emerging markets is also a key factor to its performance as it has the potential to churn good returns.
Fear over rising interest rates in the US and dollar value have hurt trading in emerging markets.
However, Dover finds this unjustified as he does not see Malaysia in particular to be affected by rising US interest rates. Instead China’s manufacturing sector and Mexico’s automobile sector are more likely to be affected by this condition.
“There is no direct correlation between interest rate hike and the up and down in the emerging market. If the rate hike is due to growth, which is also the case for the US, then it will be positive for emerging economies,” he explained.
Among the emerging markets, Dover terms Malaysia as being a more mature market, as it is well experienced when it comes dealing with crisis, international investors and managing its economy.
Despite the volatility in the currency, Malaysia is still a very resilient economy which is growing at a healthy rate, Dover added.