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  • Emerging Markets Overview

  • Emerging Markets : Economic Fundamentals

  • Growth

  • 4

    Templeton Emerging Markets

    1987 to 2007F

    Source: IMF; World Economic Outlook; April 2007

    %Emerging vs Developed Countries: GDP Growth

    0.0

    1.0

    2.0

    3.0

    4.0

    5.0

    6.0

    7.0

    8.0

    9.0

    87 88 89 90 91 92 93 94 95 96 97 98 99 0 1 2 3 4 5 6E 07F

    Developed CountriesEmerging Countries

  • 5

    Templeton Emerging Markets

    Emerging vs Developed Countries: GDP Growth%

    2007F

    0.0

    2.0

    4.0

    6.0

    8.0

    10.0

    12.0

    Chin

    aIn

    dia

    Arge

    ntin

    aRu

    ssia

    Paki

    stan

    Pola

    ndIn

    done

    sia

    Sing

    apor

    ePh

    ilipp

    ines

    Turk

    eyCh

    ileM

    alay

    sia

    Hong

    Kon

    gCz

    ech

    Sout

    h Af

    rica

    Kore

    aBr

    azil

    Taiw

    anTh

    aila

    ndM

    exic

    o

    U.K

    E.U.

    Hung

    ary

    Japa

    n

    U.S.

    Emerging Markets

    Developed Market

    Source: EIU

  • Money Supply

  • 7

    Templeton Emerging Markets

    US, UK, Japan & EU: Money Supply vs MSCI EMF Index

    Source: Factset

    US$ billion

    10/87 10/89 10/91 10/93 10/95 10/97 10/99 10/01 10/03 10/05 10/072,000

    4,000

    6,000

    8,000

    10,000

    12,000

    0

    500

    1,000

    1,500

    2,000

    2,50009-OCT-1987-09-OCT-2007

    MSCI EM (Emerging Markets) - Price with Gross Dividends - Daily Official - USD (Index) (Right)Money supply M1,U.S. + U.K. + Japan + EU (Left)

    MSCI EM Index

    U.S.+ U.K.+ Japan + EU Money Supply

  • Fund Flows

  • 9

    Templeton Emerging Markets

    Cumulative since Jan 1995 to July 2007

    0

    10

    20

    30

    40

    50

    60

    70

    80

    90

    100

    Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07

    Emerging Markets : Monthly Equity Fund Flows

    Source: EmergingPortfolio.com

    US$ billion

    *- Covers funds registered for sale in most major developed market jurisdictions and offshore domiciles, including USA, UK, Canada, Luxembourg, Switzerland, Australia, Hong Kong, Channel Islands, Germany, Austria, France and many others; includes all emerging markets funds, not limited to just emerging markets funds

  • Inflation

  • 11

    Templeton Emerging Markets

    Emerging Markets : Inflation

    Source: Factset

    %

    '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '070

    10

    20

    30

    40

    50

    60

    70

    80

    90

    100 30-OCT-1987-28-SEP-2007Cpi % Change Percent Per Annum - Developing Countries

  • Foreign Exchange Reserves

  • 13

    Templeton Emerging Markets

    1199

    278244

    192

    139137

    92

    71

    48

    361

    68

    49

    31

    24

    149

    76

    40

    26

    1815

    893

    56

    0 200 400 600 800 1000 1200 1400

    ChinaJapan

    RussiaTaiwan

    South KoreaIndia

    BrazilHong KongSingapore

    MalaysiaMexico

    ThailandTurkey

    United StatesPoland

    IndonesiaArgentina

    Czech RepublicSouth Africa

    HungaryPeruChile

    Emerging AsiaRest of Emerging MarketsLatin AmericaDeveloped

    March 2007 US$ bn

    Source : EIU; IMF

    Emerging vs Developed Markets: Foreign Reserves

  • Confidence

  • 15

    Templeton Emerging Markets

    Emerging Markets :Yield Spreads vs Stock Market Index

    Source : Factset *- Emerging Markets Bond Yield Spreads Over US Treasuries

    Basis Point Index

    MSCI EM Index

    EM Spread10/02 10/03 10/04 10/05 10/06 10/07

    100

    200

    300

    400

    500

    600

    700

    800

    900

    1,000

    1,100

    200

    400

    600

    800

    1,000

    1,200

    1,400

    1,600

    1,800

    2,000

    2,20009-OCT-2002-09-OCT-2007JP Morgan EMBI+ - Index Spread (Basis Points) - Emerging Markets Indices (Left)MSCI EM (Emerging Markets) - Price with Gross Dividends - Daily Official - USD (Index) (Right)

  • 16

    Templeton Emerging Markets

    Source: Markit; Macquaire

    Emerging Markets Vs U.S Corporate Bonds :Yield Spreads Over U.S. Treasuries

    10/02 10/03 10/04 10/05 10/06 10/070

    200

    400

    600

    800

    1,000

    1,200

    09-OCT-2002-09-OCT-2007JP Morgan EMBI+ - Index Spread (Basis Points) - Emerging Markets IndicesUS Coporates BB Spread over US TreasuriesUS Coporates BBB Spread over US Treasuries

  • 3 Cs THEMESConvergence

    Consumers

    Commodities

  • Convergence

  • Mergers & Acquisitions

  • 20

    Templeton Emerging Markets

    DateAnnounced Acquiror Name

    Acquiror Nation Target Name

    TargetNation

    Value ofTransaction($mil)

    2006 Tata Steel India Corus Group PLC U.K. 16,4002006 Cemex SAB de CV Mexico Rinker Group Ltd Australia 15,4332004 Ambev Brazil John Labatt Ltd Canada 7,7582005 Teva Pharma Inds Ltd Israel IVAX Corp U.S. 7,3672006 Vimpelcom OJSC Russia ZAO Kyivstar GSM Ukraine 5,4562006 Sinopec Corp Qingdao Br,China China OAO Udmurtneft Russia 3,5002006 Tenaris SA Argentina Maverick Tube Corp U.S. 3,0962006 Cia Vale do Rio Doce SA Brazil Inco Ltd Canada 2,3162007 Tenaris SA Argentina Hydril Co LP U.S. 2,2122005 Lukoil Overseas Holding Ltd Russia Nelson Resources Ltd U.K. 2,0002005 Bank Polska Kasa Opieki SA Poland Bank BPH SA Poland 1,9332005 Doosan Heavy Inds & Constr Co South Korea Daewoo Heavy Industries & Mach South Korea 1,8282004 Lenovo Group Ltd Hong Kong IBM Corp-Personal Computing U.S. 1,7502006 Sadia SA Brazil Perdigao SA Brazil 1,7022004 OAO Gazprom Russia Sevmorneftegaz Russia 1,7002005 Alfa Group Russia Turkcell Iletisim Hizmetleri Turkey 1,6022005 TPSA Poland PTK Centertel SP zoo Poland 1,5072006 PKN ORLEN Poland Mazeikiu Nafta Lithuania 1,501

    Some Major Mergers and Acquisitions Done by Emerging Market Companies

    Source: Thomson

  • Trade Convergence

  • 22

    Templeton Emerging Markets

    '99 '00 '01 '02 '03 '04 '05 '06 '074%

    6%

    8%

    10%

    12%

    14%

    16%

    18%

    20%

    22%

    24%31-MAR-1999-28-SEP-2007

    Asian Exports To US /Total ExportsAsian Exports To China /Total Exports

    USUS

    ChinaChina

    * data Smoothed by 12-mths moving average; Includes Hong Kong, Taiwan, South Korea, Singapore, Malaysia, Thailand and the Philippines

    Asian Export Shares to U.S. and China

    Source: Factset

    Exports /Total Exports

  • 23

    Templeton Emerging Markets

    01/99 01/00 01/01 01/02 01/03 01/04 01/05 01/06 01/070%

    5%

    10%

    15%

    20%

    25%

    30% 29-JAN-1999-28-SEP-2007

    Taiwan's Exports To China / Total ExportsTaiwan's Exports To US / Total Exports

    US

    China

    Exports /Total Exports

    Source: Factset

    Taiwans Export Shares to U.S. and China

  • 24

    Templeton Emerging Markets

    01/99 01/00 01/01 01/02 01/03 01/04 01/05 01/06 01/07

    6%

    8%

    10%

    12%

    14%

    16%

    18%

    20%

    22%

    24% 29-JAN-1999-28-SEP-2007

    (Korea's Exports To China / Total ExportsKorea's Exports To US / Total Exports

    US

    China

    Exports /Total Exports

    Source: Factset

    Koreas Export Shares to U.S. and China

  • Consumers

  • 26

    Templeton Emerging Markets

    Million2006

    0

    200

    400

    600

    800

    1,000

    1,200

    1,400

    People'sRepublic of

    China

    India EU US Brazil Russia Japan Korea Taipei,China

    Developed Countries

    Selected Emerging Countries

    Source: EIU

    Emerging vs Developed Countries: Population

  • 27

    Templeton Emerging Markets

    01/81 09/83 05/86 02/89 10/91 07/94 03/97 11/99 08/02 04/05 12/07

    -5

    0

    5

    10

    15

    20

    1.1

    1.2

    1.3

    1.4

    1.5

    1.6

    1.7

    1.8

    1.9

    2

    2.131-DEC-1981-31-DEC-2007(% 1YR) Nominal GDP (US$) - Developing countries (Left)Population (% change pa) - Developing countries (Right)

    Emerging Markets : GDP* Vs Population Growth Rate%

    * Shown as nominal GDP Growth RateSource : EIU

    Population

    GDP Growth

  • 28

    Templeton Emerging Markets

    50%

    25%

    0%

    10%

    20%

    30%

    40%

    50%

    60%

    Emerging Markets Developed Markets

    2001-2005

    Source : EIU * - GPD Per Capita Growth for the5 year period from 2001 to 2005

    Emerging Vs Developed Markets : GDP Per Capita Growth

  • 29

    Templeton Emerging Markets

    Cellular Phone Subscribers

    Millions

    Source :ML; ITU

    102 88 83 7150 41

    481

    103

    239

    162 155

    0

    100

    200

    300

    400

    500

    600

    China US India Russia Brazil Japan Germany Italy UK France SouthKorea

    Q1 2007

  • Commodities

  • 31

    Templeton Emerging Markets

    Oil Prices - EM Index vs Crude Oil

    Source:Factset01/88 01/90 01/92 01/94 01/96 01/98 01/00 01/02 01/04 01/060

    500

    1,000

    1,500

    2,000

    0

    10

    20

    30

    40

    50

    60

    70

    80

    90

    01-JAN-1988-05-OCT-2007MSC EM Total Return Price Index (Left)Energy Oil Brent Crude F

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