Templeton Asset Management’s Mark Mobius says he thinks the emerging market trouble that has seeped into the U.S. market a bit will be temporary, and will provide significant buying opportunities. Mobius tells CNBC that there’s “no good reason” for the EM declines, which appear to be the result of fears that money will flow out of EMs as the Federal Reserve tapers its quantitative easing program. He notes that emerging market central banks’ balance sheets in general remain far better than those of the U.S. and other developed markets. He does say that balance sheets of American corporations are very strong, and he expects to see a pick-up in U.S. capital spending, which he thinks will benefit emerging markets.
Templeton Asset Management’s Mark Mobius says he remains optimistic on China’s economy, and says other countries may begin adopting a Chinese type of system rather than a U.S. system. Mobius tells Bloomberg that the comparative ease with which China can get things done because of its one-party setup may appeal to many other countries. But he says the key common denominator in both the American and Chinese systems is a market economy. Mobius also talks about the impact that the talk of the Federal Reserve tapering its asset purchasing programs had on emerging markets, and why his firm is making a sizeable bet on Ukraine debt.
While emerging markets have taken their licks this summer, Templeton Asset Management’s Mark Mobius says the declines offer more of a buying opportunity than a sign of long term trouble for EMs.
“At Templeton, we’ve repeatedly championed our value-driven philosophy by frequently buying at times others are most pessimistic,” Mobius recently wrote in commentary on Templeton’s website. “This is not easy to do, even for seasoned market veterans. During the past few months, emerging markets have been subject to such pessimism. These periods of short-term volatility are certainly not new to us, and don’t change our long-term conviction of the potential emerging markets hold. We feel recent declines were overdone and based largely on irrational investor panic, and have viewed the recent pullback as an opportune time to search for bargains for our portfolios. We find valuations in many emerging and frontier stocks particularly attractive right now.”
Mobius says he isn’t concerned with what happens this year or even next year as much as he is with what will happen over the next five years. And over the long term, he thinks that the strong growth potential and low valuations present in many EMs makes them very attractive. He also notes that many EM countries are building large foreign exchange reserves that are much greater than those of developed market countries, and he says EMs tend to have lower debt and more room for fiscal and monetary stimulus than developed markets.
But Mobius also stresses the importance of being selective within EMs. “Being contrarian or value-driven doesn’t mean we will necessarily buy anything we can get our hands on during a market downturn,” he says. “During times of extreme stress, liquidity is important. If I have a choice between a small, illiquid stock and a large liquid one, naturally I would pick the latter. When buying stocks during a bust period, it’s important that you don’t buy corpses which have fallen in price but have unhealthy fundamentals (otherwise known as ‘value traps’), but rather, find patients with good recovery prospects that appear undervalued.”
Templeton Asset Management’s Mark Mobius says he remains high on China, despite the recent disappointing GDP report from the Asian giant. “The new administration in China is now just getting its game going,” Mobius tells CNBC. “Once they get going, you’re going to see a lot more investment taking place, a lot more activity in the right areas. … I think that growth engine is going to continue, and we’re very bullish on China.” Mobius also talks about some frontier markets he’s quite high on, including places in Africa and the Middle East. And he says he wouldn’t wait for further market declines to start buying stocks.
Emerging markets guru Mark Mobius says he thinks people are too pessimistic on China and Europe.
“If you look at independent statistics as related to China — for example, exports from the West, from Japan, from Germany to China — you will see that the growth rates are very healthy,” Mobius tells Fortune. He says the poor performance of the Chinese stock market this year is due in large part to a boom in initial public offerings, which draws money from the secondary market and leads to stocks underperforming.
Mobius is also high on energy, particularly coal and oil, thanks to increasing demand for power around the globe. “All the fears about commodity prices declining have been overdone,” he says. “Over the long term, the trends are very clear: Commodity prices will continue to rise.”
Mobius also talks about why he thinks the European debt crisis will be remedied, and about some developing markets he likes in that region. And he also discusses some high-dividend developing market plays.
Templeton Emerging Markets Group’s Mark Mobius says he’s bullish on Chinese coal companies.
“These companies are not only mining but also producing power and the demand for power is insatiable in China and everywhere else in the world,” Mobius tells Bloomberg. His funds currently hold shares of coal companies Shenhua, Yanzhou Coal Mining Co., and China Coal Energy Co.
Chinese coal companies have been rebounding from their cheapest levels on record, Bloomberg reports, and Mobius thinks some may be ready to expand. “The slowdown that we’ve seen in global markets means there’s an opportunity for these companies to buy mines at low cost,” Mobius said.
Emerging markets guru Mark Mobius says he is finding global valuations “rather cheap”, and says he is finding a number of attractively priced stocks in Europe, Southeast Asia, China, and Africa.
“Looking at companies around the world generally, we are finding that valuations look rather cheap right now,” Mobius says in an interview posted on Franklin Templeton’s website. “The price-earnings ratios of emerging markets averaged about 9.6 ( based on the MSCI Emerging Markets Index 12-month forward P/E), compared to a world index of 11.4 (based on the MSCI World Index 12-month forward P/E) and the U.S. average of 11.9 (based on the MSCI US Index 12-month forward P/E), as of July. The dividend yield average for emerging markets was 3.0%, while the world average was 2.9% and the U.S. was 2.2%, as of July, based on the MSCI EM Index, World Index and US Index. So, as value investors, our team has been finding lots of opportunities in these markets that we think should bode well longer term.”
Mobius says one area in particular that appeals to him is Eastern Europe. “We are finding a lot of the opportunities there from companies where valuations have dramatically wiped out, many unfairly, and provide opportunities for long-term holdings,” he says, adding that he thinks the European debt crisis “should get better with time”. He also thinks that, while China’s growth may slow, there are a number of very attractive individual companies there. And he’s also high on firms in Southeast Asia and Africa.