Investment Adventures in Emerging Markets

The View From The Other Side

We officially opened our Malaysian office in Kuala Lumpur this year, our 15th emerging markets research office around the world. We have been expanding our research team pretty vigorously for the last three years — we opened an office in Ho Chi Minh, Vietnam, in 2008 and in Dubai, UAE, in 2007, and more may follow.

With Allan Lam (left) & Tom Wu (right)

The first Templeton Emerging Markets office was set up in Hong Kong in 1987. I’m proud to say that Allan Lam and Tom Wu, pioneers from our Hong Kong start-up years, are still with the group today. Dennis Lim, who helped to start the Singapore office in 1990, our second EM research base, and many other local pioneers still remain an essential part of the portfolio management and investment team, which has now grown to 39 professionals. I believe that it is very important to have the right talent in place and in keeping that talent. Most of our portfolio managers have been with us on average for 17 years while the average tenure for the entire Emerging Markets team is 8 years.

It is important to have local portfolio managers who know the ground and speak the language. We have members from 26 different nationalities, speaking over 20 languages, it’s like a mini United Nations. The local guys sitting in the emerging market offices have a different perspective and worldview from a person sitting in U.S. or Europe.

A case in point is Thailand, which has seen several instances of political turmoil through the years that might seem alarming to people in the West. We have been investing in Thailand for over 20 years and have seen the country go through several government changes and military coups. Throughout these years, the country, its people and its businesses have learned to work through political changes.

Whenever there is less than positive headline news on emerging markets, my team would receive a lot of queries from clients. Since the constitutional changes in Thailand during the 1930s, the average term of each government has been about two years, with the Thai King providing a source of stability and a unifying factor among the political factions. Recently, rumours regarding the Thai King Bhumibol Adulyadej’s health sparked a sell-off by foreign investors in the Thailand stock market. What is more telling is that, just two days after the panicked selling, the Thailand Stock Exchange (SET) Index rebounded.

Understandably, there is nervousness whenever there are changes. A key point to remember is that leadership transitions are expected in democracies and in general, we believe that they do not necessarily translate into changes in the fundamentals of the country. We have to learn to look beyond the short-term headline news — this is one of the core principles of investing. I believe our focus on long-term value and company fundamentals puts us in good stead to manage through such uncertainties.

Having worked in both the U.S. and Asia, it was a conscious decision to have the portfolio management and investment team made up of professionals from different nationalities. This diversity of perspectives and world views is what makes our evaluation and analysis more robust. This on-the-ground, long-term perspective is what differentiates us from several foreign investors who may sometimes panic at the first sign of uncertainty.

With some of the EM team members in front of the Forbidden City, Beijing
With some of the EM team members in front of the Forbidden City, Beijing

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