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Mobius Buys Argentine Frontier Stocks at Cheapest Since 2009

Mark Mobius, who manages $45 billion at Templeton Emerging Markets Group, is buying Argentine stocks that are trading at their cheapest levels in almost three years.

“Although the political environment is not very good, the companies are very cheap so we’re looking closely,” Mobius, the firm’s executive chairman, said by telephone from Santiago. “We continue to add selectively as more money comes into the fund.”

Argentina’s Merval stock index (MERVAL) fetches 6.9 times estimated earnings, the lowest level since May 2009, according to data compiled by Bloomberg. The gauge plunged 30 percent last year, compared with the MSCI EM Latin America Index’s 22 percent drop, as gross domestic product increased 8.3 percent, more than other major Latin American economy, according to the median estimate of analysts surveyed by Bloomberg.

So-called frontier markets such as Argentina, Nigeria and Kenya offer faster growth than other emerging markets, Mobius said during a trip to Latin America this week.

“There’s lots of volatility and lots of problems in trying to get your research done, but I think these frontier markets are really interesting,” he said.

The Merval surged 5.7 percent today, the most among major global indexes and the steepest gain since May 2010, as the MSCI Emerging Markets Index (MXEF) fell 0.2 percent. The Argentine index has rallied 10 percent in the past five days.

Frontier Demotion

Argentina became the only major Latin America market classified as “frontier” in June 2009 when MSCI Inc. removed the country from its benchmark emerging-market index, citing capital controls. The demotion also followed President Cristina Fernandez de Kirchner’s seizure of about $24 billion in assets held by private pension funds, the country’s biggest stockholders. New York-based MSCI classifies its markets based on size, liquidity and economic development.

The Templeton Emerging Markets Fund (EMF) returned 15 percent in the past three months compared with a peer average of 9.6 percent and the MSCI Emerging Markets Index’s 11 percent gain, according to data compiled by Bloomberg. Last year the fund lost 23 percent versus the index’s 18 percent decline, the data show.

Mobius is also adding Brazilian, Chilean, Peruvian and Colombian stocks, he said, declining to give examples. In Santiago he has meetings scheduled with management at Lan Airlines SA (LAN) and Banco Santander Chile. (BSAN)

Latin Consumer

“We are very interested in the Latin American consumer because in almost every measure they have incredible potential to grow,” he said. “Latin American growth will be very good this year, with expansion between four and five percent.”

Templeton Emerging Markets Group isn’t adding to its Mexican holdings on prospects that South American countries will be less affected from Europe’s debt crisis and a protracted U.S. economic recovery, he said.

Chinese demand for consumer goods and commodities will continue unabated “for some time,” he said.

“People are always asking me if China is going to have a soft or a hard landing, and I’m telling them it’s not going to land,” Mobius said.

To contact the reporter on this story: Eduardo Thomson in Santiago at ethomson1@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net

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