Mobius says emerging markets are set to bounce back

09 January 2014   Category: News, Asia, Global, Emerging Markets   By Hui Ching-hoo

Franklin Templeton expects emerging markets (EMs) to reappear on investors’ radars this year as their economic fundamentals improve.

Mark Mobius, executive chairman of the Templeton Emerging Markets Group, talks up the prospects for EMs – he says they will be buoyed by factors such as their undervalued price-to-earnings (PE) ratios, stronger credit ratings, climbing foreign reserves, as well advancements made in regard to technology.

For frontier markets, Mr. Mobius says the company favours markets in Asia and Africa including Vietnam, Sri Lanka, Bangladesh, Pakistan, Nigeria, and Ghana. Franklin Templeton practices risk control to diversify its frontier market risks. “For example, the maximum we will allocate to a single country is 20% of our portfolio; also, the most we will allocate to an individual company is 10% of the portfolios’ assets,” he points out.

Mr. Mobius goes on to say that some investors will diversify their assets into Asian markets’ as they are already overweight the US market. He is also positive on the outlook for China noting that consumption, retail, and education-related equities will benefit from the country’s consumption-driven economy, despite enormous IPO activity possibly putting a dent in market valuations.

As for Hong Kong, Mr. Mobius predicts that the market will demonstrate an increase of ten-to-20% on a yearly basis in 2014. He says this uptick will mainly be driven by robust economic growth on the Mainland.