Franklin Templeton’s Mark Mobius has said Indonesian and Turkish holdings hit performance the most in his flagship £1.9bn investment trust.
Mr Mobius said in the results of the Templeton Emerging Markets Investment Trust (Temit) that positions in a Turkish and Indonesian bank dented the trust’s returns the most, as did Peruvian mining company Buenaventura.
Turkey and Indonesia have seen their stockmarkets hit in the past year after both countries were stung by the Fragile Five acronym – a catch-all term used to identify countries whose large current account deficits made them increasingly vulnerable to a tightening of US monetary policy.
The MSCI Turkey index has started to recover this year but its 7.3 per cent rise in dollar terms is far below that of the 14.8 per cent rise from the MSCI Emerging Markets index, according to data from FE Analytics. Indonesia’s recovery has been more robust and the MSCI Indonesia index is just 2 percentage points behind the broader emerging markets index.
“Tapering of the US quantitative easing programme and its impact on the country’s substantial current account deficit, along with a corruption investigation implicating figures close to the government, prompted a sell-off in the Turkish market,” Mr Mobius said.
“Banks including Akbank, one of Turkey’s largest privately owned banks, came under particular pressure, especially after the chief executive of a leading competitor bank was arrested.
“We are of the opinion, however, that Akbank is well positioned to benefit from growing demand for financial and banking services in Turkey.”
According to the trust’s annual report, the stock lost nearly 44 per cent in the year to March 31.
The manager said Indonesia’s Bank Danamon Indonesia would benefit from economic growth and rising demand for financial products from the growing Indonesian middle class, but again the stock was impacted by fears about US tightening.
“This was exacerbated by news that a bid for the bank from the Singaporean lender DBS had been abandoned,” he said. “However, we believe that this bank remains well positioned to benefit from Indonesia’s growing economy and under-penetrated banking sector.
“The share price enjoyed gains in the final quarter of the reporting period, offsetting some of the year’s earlier declines, as improving economic data flow and optimism that elections would produce a reformist government, boosted investor sentiment sending both equity prices and the rupiah ahead.”
The results show the trust’s sterling share class lost nearly 17 per cent in the year to March 31, more than the loss of 9.9 per cent in sterling terms of its MSCI Emerging Markets index.
Mr Mobius said “political difficulties” in Russia, Thailand and Turkey “may dominate news media” as would continuing analysis of Chinese economic data but that there were promising trends in emerging markets too.
“The major economic restructuring underway in China, South Korea and Mexico, and the rising focus on reducing corruption in many countries and the emergence of market-friendly economic policies and investment across much of South and Southeast Asia, could all create opportunities over time,” he said.
“Our high conviction, long-term approach to investing in emerging markets has contributed to outperformance over the last five years and in the 25 years since Temit was launched.”
Off benchmark positions give Temit a boost
Emerging markets stalwart Mark Mobius has endured a tricky year according the annual results of his investment trust.
Sentiment has been against emerging markets and the manager, it seems, has been unable to guard himself from the falls.
He is not alone though – just 19 of the 75 funds in the IMA Global Emerging Markets sector of open-ended funds have gained money in the past year, according to Morningstar.
However, Mr Mobius (pictured, below) seems to be looking for ways – albeit small ones – to tap into emerging markets from afar.
The manager has, according to the Temit trust’s annual results, made a £4m investment in FTSE 100 stock Unilever, which he says “derives a substantial portion of its revenues from emerging markets” – or more specifically 40 per cent of total turnover.
Mr Mobius said the company had made some “meaningful acquisitions” in the personal care sector in recent years while disposing of some assets in the foods division. But investors shouldn’t expect a major shift in Mr Mobius’s strategy of delving deep into emerging market-based stocks. His other off-benchmark position was Oil & Gas Development in Pakistan.
