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Turmoil in the global financial markets notwithstanding, emerging markets are poised to do well this year, believes Mark Mobius, executive chairman of the Templeton Emerging Markets Group.
High growth rate to be a 'key attraction'
Turmoil in the global financial markets notwithstanding, emerging markets are poised to do well this year, believes Mark Mobius, executive chairman of the Templeton Emerging Markets Group.
Reform & technology
Mobius, who oversees $45 billion worth of investments, expects emerging markets to benefit from the reform measures.
"Many emerging markets, among them China, India, Indonesia, Mexico and South Korea, have announced or embarked upon significant reform measures that differ in details but are generally aimed at sweeping away bureaucratic barriers to economic growth, encouraging entrepreneurship and exposing inefficient industries to market discipline," he wrote.
Mobius said he is also enthusiatic about the potential of new technology which will offer "less-developed countries the opportunity to potentially leapfrog generations of economic change in more mature markets and move directly to efficient modern systems."
Ability to bounce back
Mobius says recent weak economic performances in Brazil and Russia and Chinese military assertiveness in the South China Sea or nervousness of investors to any sign of US monetary tightening are concerns. But Mobius says "both Russia and Brazil have the resources to bounce back strongly." With Russia, he says, most of the risk is already discounted. He says China's maritime assertiveness should be looked at in the context of other foreign policy moves it has taken to improve relations and build trade with neighbouring countries.
Loose monetary policy continues
Even though the US is expected to tighten interest rates, EM may benefit from loose policy stance adopted by other developed regions like Japan. "...it is important to note that many major developed countries are still loosening policy, with Japanese quantitative easing likely to be highly significant for Southeast Asia."
Attractive valuations
"As of December-end, the favourable trends in emerging markets appeared under-recognized in equity valuations that generally stood well below those of developed markets. Even after recent rallies in some emerging markets, they continued to appear relatively attractive to us in relation to history...we remain optimistic about the potential of emerging markets," Mobius wrote in his blog post dated yesterday.
