Three things the Franklin Templeton Emerging Markets Equity team is thinking about today
Thursday 25 Jul 2019 Author: Tom Sieber

1 The United States and China agreed to resume trade talks at the G20 summit in late June. The United States also decided against imposing new tariffs and easing some restrictions on Chinese telecommunications company Huawei, while China agreed to substantial purchases of agricultural and other products from the United States.

Although this truce has reduced the likelihood of further escalation in the short term, we expect prolonged discussions in view of the pending issues between the two countries. Domestic consumption now makes up the lion’s share of China’s economic growth.

Net exports, however, were a 9% drag on growth in 2018, compared to a 9% contribution in 2017. Further, with only 19% of Chinese exports destined for the United States in 2018, we have thus far seen limited impact from US tariffs on Chinese exporters.

2 As widely expected, index provider MSCI promoted Kuwait to emerging markets (EM) status in June. Kuwait’s MSCI Emerging Markets index weighting is expected to be about 0.5% with implementation in May 2020. With substantial reserves, low levels of debt and a stable banking sector, Kuwait stands out in an EM context.

Kuwait also continues to make significant progress in terms of fiscal and structural reforms and is committed to developing a dynamic and vibrant private sector.

And while there is still some way to go, the results of Kuwait’s move to reduce the role of the public sector in the economy are encouraging. The country is moving away from oil dependence by developing its infrastructure, investing in human capital and promoting private sector involvement.

3 We continue to find opportunities in health care, as well as companies that stand to benefit from long-term secular trends relating to consumption and innovation.

Demographic shifts and ageing populations in many EM countries are intensifying pressures on health care systems. These factors should continue to be a boon for hospitals, dietary supplements, medical devices and pharmaceuticals. The health care landscape is also changing, with growing consumer awareness fuelling medical and wellness needs.

We continue to find opportunities in health care, as well as companies that stand to benefit from long-term secular trends relating to consumption and innovation

‹ Previous2019-07-25Next ›