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Emerging Markets Outlook

Title Speaker Date


Templeton Emerging Markets Overview – January 2015

Jan 31, 2015

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

  • Asia was the strongest emerging markets region as lower oil prices began to manifest in improving trade, balance of payment and inflation data for a number of countries, allowing some central banks to cut interest rates. The Indian market saw a particularly substantial gain as a Reserve Bank of India interest rate cut took investors by surprise and came on top of buoyant industrial survey and industrial production data. Most other Asian markets also recorded positive returns buoyed both by the oil price impact and optimism that aggressive monetary easing in Europe and Japan could also feed liquidity into emerging markets.
  • The African markets of South Africa and Egypt also made progress.
  • In Europe, however, other factors offset the favorable economic trends. Russia and Turkey both saw gains in local currency terms transformed into US dollar falls by currency weakness, while the Swiss decision to abandon the Swiss franc’s euro peg allowing the franc to rise sharply caused concern in Central Europe, where Swiss franc based mortgages had been a popular means to finance house buying. Greek equities fell sharply after the election of a left wing government raised renewed concerns of debt default and possible euro exit.
  • Latin America also lost ground, affected by currency weakness, sluggish economic growth and falling commodity prices, which raised concerns that fiscal policy in a number of countries might have to be adjusted. Brazil faced additional pressure from ongoing investigations into corruption at the state oil company and fears that a severe drought could lead to shortages of water and electricity (due to the high proportion of hydroelectric power). The heavily oil affected Colombian market also fell sharply.

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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 January 31, 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 January 31, 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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