Emerging markets legend Mark Mobius is warning about a pullback in emerging markets due to situations in Dubai and Vietnam. From Bloomberg’s Reinie Booysen and Zeb Eckert today:

Templeton Asset Management Ltd.’s Mark Mobius said Dubai’s attempt to reschedule debt may cause a “correction” in emerging markets, compounded by Vietnam’s currency devaluation and an “avalanche” of initial share sales.

“This may be the trigger to allow for the market to take a rest and pull back,” Mobius told Bloomberg Television by phone from Hanoi. “I felt that there would be a significant correction in what is an ongoing bull market.”

Stocks dropped around the world, Treasuries jumped and credit default swaps climbed after Dubai World, the government investment company burdened by $59 billion of liabilities, sought to delay repayment of debt. The dollar briefly fell below 85 yen, a 14-year low.

“It will be pretty serious because if Dubai has to default, that could start a wave of defaults in other areas,” said Mobius, who oversees $25 billion in emerging-market assets as executive chairman of Templeton Asset…

“A 20 percent correction is not unusual in such a bull market, so that’s quite possible and we should be ready for that,” Mobius said. “There’s no way that anyone can specifically predict exactly when and to what extent, but certainly there will be corrections along the way.”

Mobius, who has over 40 years of experience with emerging markets, talked about Vietnam and its currency devaluation. From the piece:

Mobius said he’s “bullish on Vietnam but over the short and medium term we have to look very carefully at what’s happening.”

The State Bank of Vietnam weakened the currency by 5 percent this week and raised interest rates to combat inflation and narrow the trade deficit. A 10 percent drop in the black- market rate suggests the currency may depreciate another 14 percent.

The country’s benchmark stock gauge plunged 12 percent this week, the most since the period ended 0ct. 10, 2008.

Ho Chi Minh City (Saigon), Vietnam

This follows earlier comments made by Mobius regarding Vietnamese stocks. Bloomberg’s Beth Thomas wrote this morning:

Among Asian stock markets, “the biggest risk now is Vietnam,” said Mobius, who oversees about $25 billion of emerging-market assets and has about $1 million invested in Vietnam. “The government is taking measures which may cancel out each other.”

Mobius issued a warning:

In U.S. dollar terms, Vietnam’s benchmark share index may lose as much as 15 percent in the next three to four months, Mobius said. “It can happen very quickly.”

Sources:

“Mobius Says Dubai May Trigger Markets ‘Correction’ (Update1)”
Reinie Booysen, Zeb Eckert
Bloomberg, November 27, 2009

“Mobius Says Vietnam Dong, Stocks to Decline on ‘Surge of Fear’”
Beth Thomas
Bloomberg, November 27, 2009

This post is filed under Currencies, Emerging Markets, Frontier Markets, Mark Mobius, Stocks. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.