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Emerging Markets Outlook

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Templeton Emerging Markets Overview - April 2015

Apr 30, 2015

Featuring:  Mark Mobius, Ph.D., Executive Chairman, Templeton Emerging Markets Group

  • Emerging markets outperformed developed markets quite substantially in April.
  • Expectations that developed market monetary stimulus measures might remain in place for a longer period than previously expected supported equity markets.
  • Oil and hard commodity prices rebounded, helping resources stocks to solid gains.
  • Latin American and European markets generally outperformed their Asian peers in spite of strong returns in Chinese markets.
  • Chinese markets rose sharply in response to additional monetary easing measures, including a 100 basis point reduction in the reserve requirement ratio for banks and measures to facilitate investment in Hong Kong-listed stocks by mainland investors. Suggestions that the Chinese authorities were planning a wave of mergers among state-owned enterprises (SOEs) aimed at reducing domestic costs and strengthening the SOEs’ positions in global markets also boosted investor sentiment.
  • Brazil rebounded strongly from recent weakness as rising oil and iron ore prices supported resources stocks, while political turbulence eased and the publication of 2014 accounts for state oil company Petrobras removed a significant source of uncertainty for investors.
  • The rising oil price supported a number of energy exporters including Russia, Colombia and the United Arab Emirates, with currency appreciation magnifying the Russian and Colombian gains.
  • Hungary saw the largest of all market gains in percentage terms, helped by interest rate cuts and rising optimism on growth.
  • Among a small number of markets to lose ground, Indonesian equities drifted as poor first-quarter results affected sentiment and weak economic growth data fed into disappointing budgetary trends, with investor unease about the direction of policy leading to subdued interest for new debt issuance.
  • India was another sluggish market, pulled lower by an indifferent corporate results season and forecasts of a sub-normal monsoon. This weak performance came in spite of positive economic news, including lower inflation and higher industrial production than investors had anticipated.
  • The Philippines and Egypt saw more modest declines.

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Important Legal Information

Special risks are associated with foreign investing, including currency fluctuations, economic instability and political developments. Investments in emerging markets, of which frontier markets are a subset, involve heightened risks related to the same factors, in addition to those associated with these markets’ smaller size, lesser liquidity and lack of established legal, political, business and social frameworks to support securities markets. Because these frameworks are typically even less developed in frontier markets, as well as various factors including the increased potential for extreme price volatility, illiquidity, trade barriers and exchange controls, the risks associated with emerging markets are magnified in frontier markets. Investing in smaller company securities that may have limited liquidity involves additional risks, such as relatively small revenues, limited product lines and small market share. Historically, these stocks have exhibited greater price volatility than larger company stocks, especially over the short term.

A note to our readers: Given the rapid changes that can take place in global markets, it is often difficult to provide up-to-date materials that address the most current situations. The following update is valid only as of April 30, 2015.

The significant growth potential offered by emerging markets remains accompanied by heightened risks when compared to developed markets, including risks related to market and currency volatility, adverse social and political developments, and the relatively small size and lesser liquidity of these markets.

The information provided is not a complete analysis of every material fact respecting any country, industry, security or investment. Opinions expressed are those of Dr. Mobius and are subject to change without notice. Statements of fact have been obtained from sources considered reliable. Because market and economic conditions are subject to rapid change, his analyses are valid only as of April 30, 2015. His opinions are intended to provide insight as to how he analyzes securities and are not intended as individual investment advice. Performance information is historical and should not be considered predictive of future results. All securities investments fluctuate and involve risks.

Investors should carefully consider a fund’s investment goals, risks, charges, and expenses before investing. To obtain a summary prospectus and/or prospectus, which contains this and other information, talk to your financial advisor, call us at (800) DIAL BEN®/342-5236, or visit franklintempleton.com. Please carefully read the prospectus before you invest or send money.

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