We cover a vast territory at Templeton Emerging Markets Group, spanning nearly every continent and time zone. While I’d like to think I have many unique talents, being in two places at once isn’t one of them! I’m fortunate to collaborate with an outstanding team located in offices across the globe whom I can connect with daily, even if I am attending to business on another continent—or while traveling between them! I’ve often discussed the many ways technology has accelerated change in emerging markets over the past few decades, and this also applies to investing in them. Here, I chat with my Mumbai-based colleague Chetan Seghal, who talks about the changes he’s seen since he joined our team in the mid-1990s, and why he thinks India is an exciting place to invest. Chetan Seghal Executive Vice President, Managing Director, India Director of Global Emerging Markets/Small Cap Strategies Templeton Emerging Markets Group Mark Mobius: Do you recall your first day on the job as part of Templeton Emerging Markets Group two decades ago? Take us back to that time and your first impressions. Chetan Sehgal: How can I forget the very first day! It was just me and another colleague, with rented laptops at a business center in South Mumbai. It was the era of faxes, and there were no mobile phones. In those days there was very little information. The Indian stock market was still an open outcry system, and mutual funds in India were at a nascent stage. What I did not realize then was that I was about to undertake a journey of over 20 years with Franklin Templeton. We now have more than 2,000 employees at our offices in India, and large back-office operations with technology we couldn’t have imagined when I started working in the industry. Mark Mobius: What’s the biggest change you’ve seen in the markets or investing in general over your 20+ year tenure with the team? Chetan Sehgal: From my point of view, the biggest change has been the availability of information that we now receive faster than before. Also, today there seems to be less faith in or reliance upon human judgment. We still think that matters. When we started out, we did not have access to heaps of data for a particular company or for an industry. It was about doing legwork to understand businesses, and perhaps even more importantly, the people behind the businesses. Nowadays, the market is too focused on the short-term numbers, and stocks tend to react to the slightest piece of information. The noise has increased. However, we continue to have faith in the old-school way of applying our judgment in making investment decisions—based on our on-the-ground research. We try to instill in our colleagues a philosophy of long-range thinking. We hope the managements of the companies we seek to invest in also do the same. Mark Mobius: Earlier in your career, you were a ratings analyst. How does this background influence the way you approach investing? Chetan Sehgal: As a ratings analyst, one needs to conduct an in-depth analysis of a business and the factors impacting the ability to service a company’s debt. There is a saying in the industry: When a company’s debt is un-investible, usually the equity is too. However, as an equity shareholder, one cannot be too conservative and one needs to have a more pragmatic assessment of prospects; we have to assess the potential risk versus the potential reward. Mark Mobius: How might you “rate” the public’s knowledge of emerging markets versus the potential you see? Chetan Sehgal: I think most market participants still rate emerging markets as a separate asset class, rather than understanding how integrated into the global financial and trading systems they have become. With rapid technology and knowledge proliferation, no individual country has a monopoly on entrepreneurship. To that extent, I think emerging markets—representing the largest part of the world’s population—remain underrated and underappreciated. Mark Mobius: What would you tell investors who may be rattled by the volatility emerging markets have been facing? Chetan Sehgal: During difficult periods in the market, I think the most important element is to be patient and have faith that things will eventually improve. The late Sir John Templeton once said: “Remember that both bear markets and business depressions are temporary. People do not remain pessimistic forever.” Business cycles tend to be temporary, even if there are some major changes. Companies do tend to adapt, and that’s why when the numbers are often projected to be the worst, that’s when we see upside surprises. Of course, it is important to do one’s homework, but one should always keep an open mind and remember that things can quickly change. I have been fortunate to have worked for an organization which has the patience and the belief that investment returns in short time periods can be volatile. That message has been carried forth to our extended client community as well. There have been prior periods when the markets were unloved and valuations were low, akin to the times we are seeing now in some markets. We have always had the fortitude to navigate through those times. Mark Mobius: India is your area of focus within the team. What is unique or different about investing in India versus other markets, in your view? Chetan Seghal: The size and scope of India—and the potential opportunities—are vast in many aspects. With a large population base and underpenetrated nature of consumption, India remains one of the last real bastions for growth. However, I think the real excitement about India stems from the level of entrepreneurship which the society has displayed. Lack of resources usually sees results in innovative solutions. The sacrifice which has been made by the previous generation to further the education of the next generation is now coming to fruition. We are seeing a new breed of entrepreneurs which makes India a very exciting place to invest. The Indian diaspora has spread and achieved great success in...
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."
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