Templeton Emerging Markets (TEM) has announced its annual results for the financial year ending 31 March 2023.
- Over the 12 month period TEM reported a NAV total return of 0.8% and share price total return of 0.5%. This compares to the -4.5% total return of its benchmark the MSCI Emerging Markets Index.
- Stock selection in financial, materials, and consumer discretionary stocks were the three-largest sectoral contributors to TEM’s performance while at a country level, TEM’s investments in China/Hong Kong, India, and South Africa were its largest contributors.
- TEM has proposed a full-year dividend of 5.0p per share, which compares favourably to the 3.8p per share it paid in 2022. TEM’s dividend is fully covered for 2023, with the trust generating revenues of 5.72p per share.
- The board spent £29.2m buying back shares over the 12 month period, with TEM trading on a 12.3% discount at the time of writing.
- 2023 will be the last financial year for TEM’s current chairman, Paul Manduca, and the board expects to announce his replacement later in the year.
Chetan Sehgal, TEM’s lead portfolio manager, commented:
“Heading into 2023, while we remain watchful for developments that could change our overall outlook, including China’s relationship with Taiwan and the United States, we find many reasons to be positive about EMs. Many countries are towards the end of the rate tightening cycle. Most markets in Latin America have traditionally had a significant real interest rate and their economic potential has been curtailed because of the need for macroeconomic stability.
“We expect any policy pivot in EMs to revive consumption and spur economic growth as inflation slows. In addition, after a slowdown in earnings in 2022, there is the prospect of a recovery in earnings growth in 2023, with China being the last major country to emerge from the pandemic. However, in the short-term, earnings are likely to remain weak with subdued consumption and inventory digestion and a recovery is expected more towards the second half of 2023. A pickup in earnings revisions in EMs would signify better times ahead for equity markets.
“It is an interesting time to be looking at the emerging world today. We believe that the breadth of opportunity, growth, innovation, sustainability of business models and the much stronger institutional resilience compared to decades past when considered together create an attractive future for EMs.”