Templeton is also buying equities in Dubai and Egypt.
Templeton Asset Management’s Mark Mobius said he had been buying stocks in Brazil, Russia, India and China in the past month, and called the slump in emerging-economy shares a “correction” in a bull market.
“Despite the fact that a lot of people think that we are entering into a bear market, we don’t believe so,” said Mobius, who oversees about $34 billion in emerging markets as Templeton Asset Management’s Singapore-based executive chairman. “This is a correction in an ongoing bull market,” he added.
The MSCI Emerging Markets Index has dropped 15 per cent from an April 15 high on concern that China’s steps to slow inflation and European nations’ struggle to finance their deficits will derail a global economic recovery. The measure has climbed 96 per cent from a four-year low in October 2008 and gained 3.2 per cent yesterday, rebounding from the steepest drop since March 2009, on speculation valuations are attractive.
“When the time comes, emerging markets will recover faster and in a big way,” Mobius said. “We’ve been buying because we have had net flows into our funds. And most of the buying has been in the BRIC countries.”
Templeton had also been buying equities in other nations, including Dubai and Egypt, according to Mobius. The firm hadn’t reduced holdings in South Korea because the companies it owned were “relatively inexpensive” when it purchased them and may benefit from international sales should South Korea’s economic rebound stall, he added.
North Korea
North Korea expelled eight South Korean government workers and threatened to close the border yesterday as US Secretary of State Hillary Clinton said in Seoul it was not too late to make amends for sinking one of the South’s warships.
South Korea will seek United Nations Security Council action against North Korea and halt trade with its communist neighbour over the deadly torpedoing of a warship in March that killed 46 sailors. “North Korea will pay a price corresponding to its provocative acts,” South Korean President Lee Myung Bak said in Seoul on May 24. North Korea shipping will also be banned from South Korean waters, Lee added.
The probability of war between the nations was “quite low” even as tensions had escalated, Mobius said in a blog posting on Thursday. Lee’s measures might accelerate change and help in opening up communist North Korea “in the long run,” he said.
“In the short term, of course, there will be anxiety, which could impact the markets,” Mobius said. “Despite all the geopolitical concerns, South Korea has continued to grow,” he added.
Kim Jong Il
The Kospi Index slumped 2.8 per cent on May 25, driving it 11 per cent below the April 26 high, after a report that North Korean leader Kim Jong Il ordered the country’s military to get ready for combat.
Valuations on Kospi have dropped to 9.6 times of the estimated earnings, the lowest in Asia after Pakistan. Korean equities traded at a multiple of 16.1 a year ago. The gauge advanced 0.8 per cent as of 1:31 pm, rebounding for a second day.
South Korea’s economy expanded 1.8 per cent in the first quarter on stronger overseas sales and domestic spending and the Bank of Korea forecasts 2010 growth of 5.2 per cent.
