TEMIT posts 41.3% NAV return, expands share buyback programme

TEMIT Outperforms Amid Global Market Volatility

Templeton Emerging Markets Investment Trust (ASX:TEM) posted an impressive 41.3% net asset value (NAV) total return for the year ended 31 March 2026, substantially ahead of the MSCI Emerging Markets Index’s 26.8% return. The trust’s share price total return was even stronger at 48.6%, helped by a narrowing discount to NAV that closed to 8.2% from 12.4% a year earlier. This performance highlights the resilience and stock-picking prowess of its investment managers despite a turbulent geopolitical backdrop.

Chairman Angus Macpherson congratulated the investment team led by Chetan Sehgal and Andrew Ness, noting their Citywire AAA rating awarded in May 2025 for consistent long-term performance. The trust’s 5- and 10-year NAV total returns of 38.2% and 220.3% respectively also comfortably outpaced benchmark returns, underscoring the strength of its long-term investment approach.

Strategic Buybacks and Dividend Stability

In a bid to manage the persistent discount volatility, TEMIT spent £166.7 million repurchasing shares during the year, buying back nearly 80 million shares at an average discount of 10.2%. This activity added 0.8% to NAV per share for remaining shareholders. The Board has now increased its buyback target to £300 million over the next one to two years, reflecting the trust’s larger market capitalisation and ongoing commitment to discount control.

The dividend was held steady at 5.25 pence per share, comprising a 2.00 pence interim and a proposed 3.25 pence final dividend, both fully covered by revenue earnings of 5.39 pence per share. The dividend policy reflects a balance between rewarding income-focused shareholders and preserving capital for growth.

Portfolio Tilt Towards AI and Structural Growth

TEMIT’s portfolio remains heavily weighted in key emerging markets: South Korea (22.0%), Taiwan (23.0%), China/Hong Kong (23.4%), Brazil (9.5%), and India (8.5%). The trust’s overweight positions in South Korea and Taiwan were significant contributors to outperformance, driven largely by semiconductor and AI-related companies like SK Hynix, Taiwan Semiconductor Manufacturing Company (TSMC), and Samsung Electronics.

Emerging themes such as artificial intelligence (AI) and digitalisation underpin the investment thesis, with the trust’s managers highlighting strong demand for AI computing chips and infrastructure. South Korea’s semiconductor memory firms, notably SK Hynix, benefited from tight supply and rising prices, while TSMC’s leadership in advanced chip manufacturing positioned it well to capitalise on AI growth.

China’s market delivered modest gains, with selective exposure to internet platforms investing in AI and industrial companies benefiting from rising power demand linked to data centres. Brazil’s robust 53% return was supported by easing interest rates and strong oil prices, while India faced headwinds from US policy and rising oil costs but remains a key growth market with structural reforms underway.

Geopolitical Risks Temper Gains

The year was marked by heightened geopolitical tensions, including US tariffs initially imposed on many trading partners, which were later struck down by the US Supreme Court, and escalating conflict in the Middle East following US and Israeli air strikes on Iran. These developments caused market volatility and a sharp NAV decline in March 2026, particularly impacting oil-dependent Asian economies.

Despite these headwinds, TEMIT’s diversified portfolio and selective underweight in Middle Eastern assets helped mitigate risk. The Board and managers remain watchful of ongoing geopolitical risks, including US-China trade frictions and regional conflicts, which continue to influence emerging markets’ outlook.

Governance, ESG Integration, and Stewardship

TEMIT maintains a strong focus on corporate governance and environmental, social, and governance (ESG) factors as part of its investment process. The trust’s managers integrate ESG considerations into company research, engagement, and proxy voting, aiming to protect shareholder value and encourage sustainable business practices.

Case studies in the full Stewardship Report highlight efforts with holdings like SK Hynix, which has committed to net zero operational emissions by 2050 and is actively improving energy efficiency, and Petrobras, which is investing in decarbonisation technologies despite its carbon-intensive sector. The trust’s approach balances financial returns with responsible stewardship.

Renewed Investor Interest and Marketing Efforts

Investor sentiment appears to be shifting back towards emerging markets, driven by stretched valuations in US technology stocks and recognition of emerging markets’ growing share of global GDP and economic growth. TEMIT’s Board emphasises that narrowing the discount to NAV requires not just buybacks but also sustained investment performance and enhanced investor awareness.

To that end, TEMIT invests significantly in marketing and communications, recently winning the Association of Investment Companies’ “Best Marketing Campaign” award for its multi-channel strategy. The trust also introduced online streaming of its Annual General Meeting and invited respected financial journalist Jeff Prestridge as a guest speaker to boost shareholder engagement.

Outlook and Ongoing Challenges

Looking ahead, TEMIT’s management acknowledges the balance of structural growth opportunities, particularly in AI and technology sectors, against persistent geopolitical and macroeconomic risks. The trust remains committed to a long-term, bottom-up investment philosophy focused on companies with sustainable earnings power trading at attractive valuations.

While volatility and setbacks are expected, the Board believes emerging markets will play an increasingly important role in global portfolios. Renewed investor interest could signal the early stages of a multi-generational opportunity, but the path will likely be uneven.