EMERGING MARKETS OUTLOOK SPONSORED BY TEMPLETON EMERGING MARKETS INVESTMENT TRUST Understanding China’s dominant but under pressure internet stars You may have heard of these big tech plays but what do they actually do?

fter a strong start to 2021 Chinese internet A businesses including Alibaba and Tencent saw their share prices come under mounting duress on a mix of heightened regulation and dampened sentiment towards the wider technology sector. Alibaba has been hit by a $2.8 billion anti-trust fine amid increased regulatory pressure domestically, while in the US the Securities and Exchange with their smaller counterparts Alibaba – China’s answer to Commission is requiring Chinese Meituan, JD.com and Baidu in the Amazon – with a big footprint in stocks with a US listing to meet MSCI China index was more than online shopping and dominant stricter criteria. 35% as at the end of March 2021. position in cloud computing. Yet these companies still Given this dominance it is Tencent – owns hugely popular dominate the Chinese equity worth having some idea of what web portals, messaging and markets. The collective weighting each of these businesses do in a social media apps as well having of Tencent and Alibaba along little more detail. a substantial presence in the video games market. Chinese internet stars endure volatile first quarter of 2021 Meituan – online shopping platform which focuses on locally 800 TENCENT sourced consumer products and services as well as hosting 750 ABABA customer reviews and offering 700 Groupon-style discounts. 650 JD.com – China’s second largest e-commerce business with a 600 burgeoning logistics arm, which 550 opened up its services to third 500 parties in 2017 and is subject to a JAN FEB MAR proposed spin-off. Baidu essentially a Chinese This outlook is part of a series being sponsored by Google – alongside search engine Templeton Emerging Markets Investment Trust. services it specialises in areas For more information on the trust, visit here such as online advertising and artificial intelligence.

38 | SHARES | 29 April 2021 EMERGING MARKETS OUTLOOK SPONSORED BY TEMPLETON EMERGING MARKETS INVESTMENT TRUST Emerging markets: Views from the experts

Three things the Franklin Templeton Emerging Markets The global Equity team are thinking about today competitiveness of 3. emerging market Chinese internet stocks matters, rising domestic (EM) companies has been a have struggled in recent inflation has narrowed the standout feature amid market 1. weeks amid tighter scope for monetary policy swings and pandemic worries. regulatory scrutiny, higher support. The central bank A widespread chip shortage US Treasury yields and block raised its key interest rate has underscored the world’s trades linked to a troubled from a record low in March, reliance on Taiwanese and hedge fund. China’s increased signaling the start of a rate-hike South Korean semiconductor emphasis on fair competition, cycle. We believe that Brazil’s firms, which have dominated consumer protection and data economic recovery will rely the global industry with security within the internet heavily on the government’s their strong manufacturing industry has been a chief ability to implement long- capabilities. South Korean concern. Though regulatory awaited structural reforms. battery makers have become news could drive near-term Meanwhile, as a major key suppliers of electric vehicle share-price volatility, we commodity exporter, Brazil (EV) batteries, supporting EVs’ remain largely confident in is likely to benefit from rising growing penetration on the the longer-term fundamentals prices for commodities, as back of favourable policies of several leading internet well as their broad appeal and advancing technology. companies. These companies as an inflation hedge. We Chinese biotechnology have grown rapidly by offering expect higher interest rates in companies working on superior user experiences and Brazil to bode well for banks, innovative treatments for efficiencies, and we expect especially market leaders that cancer and other major these strengths to continue have weathered the pandemic diseases have reaped underpinning their structural with the help of strong growing success in licensing earnings power. We also capital positions and large their new drugs to global think that regulators are keen deposit franchises. pharmaceutical firms. to ensure the sustainable development of the internet TEMPLETON EMERGING MARKETS INVESTMENT TRUST (TEMIT) space for all stakeholders, rather than curb its growth. Porfolio Managers

Brazil’s fiscal challenges have 2.returned to the spotlight as an intensifying pandemic adds pressure on the government to ramp up already-massive spending. Chetan Sehgal Andrew Ness Concerns about the country’s Singapore Edinburgh mounting debt burden have TEMIT is the UK’s largest and oldest emerging markets weighed on its stock market investment trust seeking long-term capital appreciation. and currency. Complicating

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