Templeton Emerging Markets (TEM)

The past 12 months have been a strong period for emerging markets equities, which have delivered almost twice the returns of their developed market peers. Templeton Emerging Markets (TEM) has taken it a step further, outperforming its benchmark, the MSCI EM Index, by 29.4 percentage points as of 05/06/2026. Outperformance was driven primarily by TEM’s holdings in semiconductor-related companies such as Taiwan Semiconductor Manufacturing, SK Hynix, Samsung Electronics, and MediaTek, which have benefited from strong demand linked to the build-out of AI infrastructure.

Whilst managers Chetan Sehgal and Andrew Ness remain constructive on these names and on the AI theme more broadly, they have trimmed their positions in some of these companies to manage active weight and reallocated capital to other parts of the market. For instance, in South Korea, they initiated a new position in KakaoBank, one of the leading mobile-only banks in this country, which is also expanding its footprint into other Asian markets through partnerships. South Korea is currently TEM’s largest country overweight, where initiatives to improve corporate governance standards and enhance shareholder returns are ongoing.

Chetan and Andrew have also increased their exposure to China, reducing the trust’s underweight position in the country. They have increased exposure to industrial companies, as global demand for power continues to rise. This trend has been accelerated by the energy requirements of data centres supporting the AI boom, driving strong demand for related infrastructure such as energy storage batteries and power equipment. The managers have also added to their position in BYD, one of the world’s largest EV manufacturers, as they believe higher oil prices could make EVs more attractive to consumers. BYD is also a leading energy storage battery manufacturer.

Whilst there was no trading activity in Latin America, TEM remains overweight the region. The allocation is predominantly focussed on banks, such as Mexico’s Grupo Financiero Banorte, although it also includes, among others, oil and mining companies.