Mark Mobius: Investors Will Move To Emerging Market Stocks, Currencies
Emerging markets legend Mark Mobius believes that investors who have their money tied up in safer assets during the financial crisis will eventually move their funds into emerging markets in the quest for better returns. Mobius, the Managing Director of Templeton Asset Management, was interviewed Tuesday by CNBC Asia. From the exchange:
CNBC: I know you have a lot of expertise in the emerging markets area and I wondered given how much the US rallied over night, Asia didn’t quite follow suit to the same degree. Is the risk appetite for emerging markets asset still pretty weak out there even though we are seeing some base building?
MOBIUS: That’s right. The spread between emerging markets debt interest rates and US Treasury is still quite high, although it has come down from its high point. That indicates that the confidence in emerging markets is still not there. There is no reason why it should be and given the fact that the US is in such dire financial situation and that’s lapped over into the rest of the world. But we see going forward as people begin to move out of US treasuries, as they begin to realise that the valuations in emerging markets are so good, one is going to see that move out into the emerging markets…
CNBC: Is that because, in the western world and Japan, we are moving to an effectively zero interest rate policy and at that point investors are going to look at what they are getting on — their bond investments will say: we are not getting anything here, so let’s look about?
MOBIUS: Exactly. Investors will realise at one point: I am getting 1% or less with US treasuries and I can get 5–8% dividend yield on emerging market stocks. In addition to that fact that as people retrieve from the US dollar — because until now they had put everything into US treasuries — you will see the emerging market currencies begin to rebound again because some of them are undervalued.
Source:
“Valuations will drive investors back to EMs: Mark Mobius”
Moneycontrol.com (India), November 25, 2008
