Mobius Buys Technology Stocks Amid Internet Selloff
Mark Mobius, who oversees about $50 billion at Templeton Emerging Markets Group, said he’s buying technology stocks after a global rout left companies such as Tencent Holdings Ltd. (700) trading at “reasonable” valuations.
“If you look at Tencent for example, it’s come down about 20 percent and that’s a pretty good correction,” Mobius, whose Templeton Asian Growth Fund (TEMFRBI) outperformed 88 percent of peers this year, said in an interview in Bloomberg’s Hong Kong office, declining to name specific stocks he’s buying.
Mobius, an investor in emerging markets for more than 40 years, is adding to holdings amid a retreat that erased this year’s gains in the Bloomberg Asia Pacific Internet Index and sent Tencent to a two-month low today. While Asia’s largest Internet company is valued at a 159 percent premium versus the MSCI Asia Pacific Index based on estimated earnings, that’s the smallest gap since Jan. 27 and down from 224 percent in March.
Tencent fell 4.5 percent at the close in Hong Kong today, extending its drop from a March 6 record to 21 percent. The Bloomberg Asia Internet gauge slid 3.8 percent, while SoftBank Corp., which owns a stake in Alibaba Group Holding Ltd., sank 4.6 percent in Tokyo. Naver Corp. declined 6.5 percent in Seoul.
Tencent trades 23 percent below the average 12-month price target of 32 analysts tracked by Bloomberg after losing about $32 billion of market value since March 6. SoftBank shares are 24 percent below analysts’ average price forecast, versus 20 percent for Naver.
The Asian Internet measure had gained as much as 14 percent this year on speculation growing demand for social networking, e-commerce and online games would boost earnings and fuel takeovers in the industry.
The gauge is valued at 27 times estimated profits for the current fiscal year, more than twice as expensive as the MSCI Asia Pacific Index and near the biggest premium since 2006, data compiled by Bloomberg show.
JPMorgan Asset Management Ltd. is also acquiring technology shares, figuring the companies still hold value.
“We have been selectively buying some Internet stocks in Asia,” said Grace Tam, a Hong Kong-based global market strategist at JPMorgan Asset. “As long as they can deliver earnings growth, we still believe they have strong fundamentals. We’re still quite positive on the sector in the medium term.”
Investor concern that a flood of initial public offerings in the technology industry would weigh on existing share prices has eased, Mobius said.
Weibo Corp., China’s biggest microblogging outlet, plans to offer 20 million shares for $17 to $19 apiece, according to a regulatory filing April 4. At the top of the offering range, Weibo would be worth about $3.9 billion, and be valued at 21 times 2013 sales. That compares with 30 times sales for Twitter Inc. (TWTR), the San Francisco-based microblogging service.
Analysts expect Alibaba, China’s largest e-commerce business, to hold the biggest IPO since Facebook Inc. Goldman Sachs Group Inc. valued Alibaba at $150 billion in a Jan. 29 report, while Macquarie Group Ltd. said the Hangzhou-based company may be worth as much as $200 billion.
“A lot of people were concerned because of the number of new issues coming in the U.S. market,” Mobius said. “I think that’s probably coming to an end now.”
Mobius isn’t interested in Alibaba’s IPO, he said in an interview on Bloomberg Television today, citing concerns about Alibaba’s corporate governance. The company said March 16 it will begin the process of filing for a share sale in the U.S., after struggling to persuade Hong Kong’s regulator that it should be allowed to let its partners nominate a majority of directors.