Investor Mark Mobius is buying more equities in emerging markets as economic growth remains buoyant in China and valuations plunge from historical averages.
Stocks are in a “sweet spot,” Mobius, who oversees about $50 billion as executive chairman of Templeton Emerging Markets Group, said in an interview from Singapore. He’s adding to equities in China, Russia, Turkey, Thailand and Africa.
The MSCI Emerging Markets Index trades at 10.1 times estimated earnings, compared with the decade average of 11.5, after dropping 14 percent from this year’s high on March 2 on concern exports to Europe are faltering because of the region’s debt crisis. The index is still up 1.9 percent this year, compared with a 2.5 percent gain for the MSCI World Index, which trades at 12 times earnings.
“We continue to invest,” said Mobius. “The prices are so reasonable now. The P/E ratio for emerging markets is about 10 times now, which is very, very cheap. We are at a very very sweet spot.”
In China, Mobius likes consumer stocks, which are poised to benefit from the government’s emphasis on consumption over exports as a future driver of the economy.
“We like China because of the growth,’ Mobius said. ‘‘A lot of people ask me if China is having a hard or soft landing. And we tell them China’s not having a landing and it continues to fly.”
China’s commerce minister said his nation’s economy is heading for a rebound following government measures to support growth. The central bank announced a cut in interest rates for the first time since 2008 on June 7 before the release of May economic data which showed consumer prices rose the least in two years while industrial output and retail sales trailed analysts’ estimates.
“I personally think that the June situation is turning for the better,” Chen Deming told reporters yesterday in Los Cabos, Mexico, without specifying the signs of improvement. With a “pretty obvious” downward trend the past two months, policy makers took steps to shore up consumption, he said.
Mobius predicted gains in emerging markets in March 2009, when he told Bloomberg Television that developing-nation equities are building the base for the next “bull-market” rally. The MSCI Emerging Markets Index more than doubled from its lows that month to its peak in May 2011.
The 18 percent plunge in a gauge of global emerging-market equities from early March to early June this year is a “typical spring-time correction” and won’t turn into a bear market, Citigroup Inc. said in a June 14 report. Andreas Roemer, chief investment officer for emerging markets at Frankfurt-based DWS Investments Management GMBH, said developing nation equities should rise in the second half of the year after “huge” monetary and fiscal stimulus in countries like Brazil, China and Russia.