This month marks my 30-year anniversary with Templeton Emerging Markets Group! The opportunity to open up new emerging markets, learn about new industries, meet wonderful people around the world and most of all be part of the Templeton emerging-markets family has been a real blessing. This anniversary had me thinking about the many ways the world—and emerging markets—have changed over the past three decades. I am known around the world as a pioneer in the world of emerging-market investing, going places many tourists and investors alike often fear to tread. As such, I have been given some colorful nicknames over the years, including “The Indiana Jones of Emerging-Market Investing,” which I actually find flattering. That said, I am not a lone-wolf type action hero. I have had the support and great pleasure of working with a large team over the years and wouldn’t have achieved the success I have had without them. So much has happened over the past 30 years within the markets and our team, including the recent change of Stephen Dover taking over my CIO responsibilities of Templeton Emerging Markets Group in 2016. Even though Stephen has taken on the day-to-day management of the team, I continue to serve as executive chairman and enjoy my work exploring and sharing my views on emerging markets on behalf of Franklin Templeton. I have no plans to stop! I grew up in New York, and when I first graduated from college and went out in search of work, I contacted alumni who I hoped might help me find a professional job. I didn’t directly ask them for a job, but rather, for their advice on how to build a career. They were all gracious and their words still resonate with me. One consultant I visited had a plaque on his desk that I will never forget. It explained the success of his very prosperous firm. It said: “There is no limit to how far you can go as long as you don’t mind who gets the credit.” In a succinct and eloquent way it conveyed the most elemental truth: Your success depends on the success of other people around you, and by helping them succeed you also succeed. Meeting My Mentor: Sir John Templeton In the 1970s and early ’80s, I had been working as an analyst and broker in Asia and traveled periodically to Nassau in the Bahamas, where the legendary investor Sir John Templeton was based. During one of my presentations to the Templeton portfolio teams, he and I first became acquainted. One day he approached me to lead his new emerging-markets team and manage a new emerging-markets fund he was starting. The investment potential of developing markets had been recognized for a long time, but the actual birth and classification of emerging markets as an investment category in a more formal or recognized way probably could be tied to an event in 1986. The International Finance Corporation (IFC), a World Bank subsidiary, engaged in a campaign to encourage capital market developments in the less-developed countries, which had often been given unflattering designations such as “third-world” nations. At that point in time, a handful of institutional investors invested US$50 million in an emerging-markets strategy at the behest of the World Bank’s IFC. A year later, in 1987, MSCI developed its first emerging-markets indexes.1 In 1987, while working for Templeton, our fund became the first of its kind to be listed on the New York Stock Exchange, opening the world of emerging markets to mainstream investors. Back then, we had only a handful of markets to invest in. Today, the team, known as Templeton Emerging Markets Group, operates as part of Franklin Templeton Investments and we invest in more than 60 countries around the globe. When we started managing emerging-market portfolios, it was a difficult time to invest in many respects. Although there were many emerging-market countries in Asia, Africa, Latin America and Europe that looked exciting to us, very few of them were actually open to foreign investment. There were strict foreign exchange controls and limitations, in addition to a plethora of problems with market liquidity, corporate governance and safekeeping of securities. We were there at the start of many exciting developments, which included the opening of many markets to wider foreign investment. In the past 30 years, we’ve also seen the end of apartheid in South Africa, easier access to eastern European economies (including Russia), the opening up of India to foreign investment and, of course, China’s embrace of capitalism and rapid urbanization. Today we can invest in a wide variety of emerging markets around the world, as well as a host of “frontier markets,” a designation given to the lesser-developed subsector of emerging markets, which includes the majority of the African continent. We are very excited about the potential for these frontier countries in the next 30 years, as many are growing at a rapid pace and quickly assimilating the latest technological advancements, particularly in mobile finance and e-commerce. Generally, more youthful and growing populations mean consumer power has been on the rise, with a growing middle class. Keep Asking “Why?” In my investment career, I’ve found that you need to keep on asking the question: “Why?” Why is that person doing what he is doing? Why is that company making those decisions? What is behind them? By asking such questions, I’ve been able to miss a lot of possible disasters. Asking questions can be uncomfortable, but pioneers in any field have to get used to stepping outside the comfort zone. While the markets have changed quite a bit since I first met the late Sir John, our core investment philosophy remains true to his enduring approach. Sir John made his foray into Japan in the 1950s, which at the time, was considered a poor and developing country. He bravely invested there and other places in the world where others were not. He taught me many things, but one thing that I have certainly embodied is... Investment Adventures in Emerging Markets - Notes from Mark Mobius Mark Mobius, Ph.D., executive chairman of Templeton Emerging Markets Group, joined Templeton in 1987. Currently, he directs the Templeton research team based in 15 global emerging markets offices and manages emerging markets portfolios. As he spans the globe in search of investment opportunities, his “Investment Adventures in Emerging Markets” blog gives readers a taste for what he does, when, where, why and how. Dr. Mobius has written several books, including “Trading with China,” “The Investor’s Guide to Emerging Markets,” “Mobius on Emerging Markets,” “Passport to Profits,” “Equities—An Introduction to the Core Concepts,” “Mutual Funds—An Introduction to the Core Concepts,” ”The Little Book of Emerging Markets,” and “Mark Mobius: An Illustrated Biography."
In just a few decades, Vietnam has undergone a dramatic transformation, from an agrarian society to one that has embraced the modern era. Its youthful population and growing middle class have helped drive solid growth—and opportunities for many global investors. This up-and-coming market hasn’t fully embraced capitalism—it remains a Communist state—but it has managed to achieve an interesting balance. There has been a bit of buzz about Vietnam among investors in the past few years, but given the election of Donald Trump as the next US president, the Trans Pacific Partnership (TPP), of which Vietnam would have been a key beneficiary, seems even less likely to move forward. However, new trade deals are in the works—including the Regional Comprehensive Economic Partnership (RCEP), which Vietnam has joined along with nine other members of the Association of Southeast Asian Nations as well as Australia, China, India, Japan, Republic of Korea and New Zealand. And, there could be new, bi-lateral trade deals in the future. Nevertheless, I believe Vietnam remains an attractive destination for both investors and tourists, and we think its future looks bright. I recently had the opportunity to visit Vietnam and see the latest wave of changes taking place. Vietnam has seen strong economic growth, with gross domestic product (GDP) growth averaging just shy of 7% from 2000–2015.1 This economic boom has also boosted consumer buying power. In 1990, gross national income (GNI) per capita was US$910, but by 2015, it had risen to $5,690.2 During my recent trip to Vietnam, I found tremendous opportunities in the consumer sector as a result of this rise in income levels. For example, we visited a dairy company and learned that while per-capita milk consumption in the United States has been above 100 liters per person per year, and in China it was 30 liters, in Vietnam it was only 16 liters. However, that number has been growing very quickly, and it’s no wonder the milk company we visited in Vietnam has seen profit growth every year for the last five years. The company produces fresh raw milk from local cows as well as reconstituted milk from powder, condensed milk, baby formula and yogurt. The company exports its products not only to its neighbors in Asia but also to some markets in the Middle East. Many companies in Vietnam are government-majority owned, but privatization is expanding with plans to publicly list shares of a number of companies in the future. Some will initially be listed on the Ho Chi Minh Stock Exchange’s secondary exchange, the UPCoM, which has less stringent disclosure requirements, but we think eventually many companies will likely be required to list on the main board and institute broader disclosure. We believe the sale of some state-owned enterprises should help lower Vietnam’s rising national debt, but foreign direct investments are strong, and industry and exports are doing well. As services (including tourism) represent more than 40% of Vietnam’s GDP, it is the area we are most interested in.3 Phu Quoc Island To study Vietnam’s tourist industry, my colleagues and I flew down to Phu Quoc Island off the coast of southern Vietnam. We landed at a new, modern airport capable of handling a growing influx of both local and foreign tourists. Local tourists can fly from Ho Chi Minh City for the equivalent of only US$30 to US$50 one way on Vietnam’s low-cost airline. While travel regulations can be tricky and ever-changing, today, foreign tourists can stay between 15 to 30 days without a visa in Phu Quoc, which is a unique concession not available for visitors to other parts of Vietnam. During our stay, we drove and cycled from one end of the island to the other and found a construction boom under way with new hotels, apartments, villas and a spectacular cableway under construction linking the island with other smaller islands. Phu Quoc itself is a large island (574 square kilometers compared with Singapore’s 719), and Vietnam’s government has designated it for tourist development. We drove to our hotel on a new four-lane highway, and as we toured the island we saw construction of a new north-south four-lane highway under way as well. The government has spent over US$1 billion thus far for infrastructure on the island, including more than US$700 million on the airport where we arrived. According to regional news reports, through summer of 2016, the government had approved and licensed more than 160 projects involving a total investment of more than US$6 billion. As a microcosm of the country as a whole, Phu Quoc has seen quite a transformation when we consider its history as a place of refuge. The island was also once a prison camp used during various regimes, from the French colonial period through the Vietnam War. One of the tourist attractions is a prison camp/museum, complete with barbed wire, guard towers, and models of guard soldiers and prisoners. The island is also famous for its fish sauce and for peppercorns; which we saw growing on vines around the island. Tourism is transforming the island’s economy, which had previously subsisted on fishing and the aforementioned peppers and fish sauce. A major Vietnamese developer constructed a huge complex at the northern part of the island, including 1,000 hotel rooms, 1,000 villas, a safari park (apparently one of the world’s largest), a water park and an amusement park featuring many types of roller coasters and other stomach-churning rides. There is also a 27-hole golf course, an international hospital and facilities for what could become a major casino. Another developer is building a complex on the southern part of the island, which includes a spectacular cable car that crosses the sea to neighboring islands. We also saw other new hotels being built along the beach. A pearl farm has also been introduced, so we saw a number of shops promoting the local pearls. Touring the villages around the island we noticed there was still a dire need for better roads and facilities. The influx of tourists and construction of high-end facilities to accommodate... Investment Adventures in Emerging Markets - Notes from Mark Mobius Mark Mobius, Ph.D., executive chairman of Templeton Emerging Markets Group, joined Templeton in 1987. Currently, he directs the Templeton research team based in 15 global emerging markets offices and manages emerging markets portfolios. As he spans the globe in search of investment opportunities, his “Investment Adventures in Emerging Markets” blog gives readers a taste for what he does, when, where, why and how. Dr. Mobius has written several books, including “Trading with China,” “The Investor’s Guide to Emerging Markets,” “Mobius on Emerging Markets,” “Passport to Profits,” “Equities—An Introduction to the Core Concepts,” “Mutual Funds—An Introduction to the Core Concepts,” ”The Little Book of Emerging Markets,” and “Mark Mobius: An Illustrated Biography."