The Templeton Emerging Markets Group, headed by Mark Mobius, is currently looking at two emerging market investment themes in particular; consumer demand growth and technology.
Consumer product companies including consumer staples, retailing, and discretionary purchases such as automobiles, are currently commanding Mark Mobius’ attention from the consumer sector. Frontera looked at the Columbia Emerging Markets Consumer ETF (ECON), which offers exposure to the consumer sector in emerging markets from a performance and valuation perspective.
|Genting Berhad (GEBHY)||Malaysia||Hospitality, gaming, and entertainment||13.22|
|Woolworths Holdings Limited (WLWHY)||South Africa||Retail stores||14.27|
|Thai Beverage Public Company Limited (TBVPF)||Thailand||Beverage company||16.53|
|Tiger Brands Limited (TBLMY)||South Africa||Packaged goods company||16.95|
|PT Astra International Tbk (PTAIY) (PTAIF)||Indonesia||Conglomerate engaged in the automotive, financial services, heavy equipment and mining, agribusiness, infrastructure and logistics, information technology, and property businesses||18.25|
As of September 18, the ETF was up 26.72% YTD, with emerging market consumer stocks such as Lojas Renner S.A. (LRENY), JD.com ADR (JD), and Hindustan Unilever (HINDUNILVR.BO) leading performance with 78.5%, 75.9%, and 65.3% return YTD. From a valuation perspective, the ECON ETF currently trades at a P/E of 36.34, with stocks of certain companies trading at attractive valuations (see table above). From the ECON portfolio, Genting Berhad (GEBHY) is currently trading at a P/E of 13.22, Woolworths Holdings Limited (WLWHY) at 14.27, Thai Beverage Public Company Limited (TBVPF) at 16.53, Tiger Brands Limited (TBLMY) at 16.95, and PT Astra International Tbk (PTAIY) (PTAIF) is at 18.25.
Mobius highlights that within the technology sector, emerging-market companies have become leading players in both adoption and development. The sector outperformed all other sectors in the first half of 2017. From a valuation perspective, emerging market tech stocks score well over their developed market competitors. In a recent Frontera article, we delivered the underlying data showing how emerging market tech giants are 35% cheaper than the FANGs. FANGs is an abbreviation representing Facebook Inc. (FB), Amazon (AMZN), Netflix Inc. (NFLX) and Google (GOOG) parent Alphabet Inc.
While the Templeton emerging markets group remains cautious of share price advances in certain internet stocks, they see value across the investment theme. With the move towards more online transactions becoming eminent, related companies should benefit from the increase in shopping and targeted advertising. Also, gaming companies, those associated with graphics processing units for data centres and artificial intelligence applications; connectivity and processor integrated circuits for autonomous cars; and devices related to the ‘internet of things’ are specific areas where Mobius sees an opportunity within the technology sector.
While consumer and technology sectors are currently Mobius’ favorite investment themes, South Africa (EZA) is his favorite investable market within the African continent, as discussed next.