Mobius Sees China Benefiting as Brexit May Herald ‘Dark Ages’by
Turmoil in Europe, U.K. may push investors toward Asia: Mobius
Brexit to accelerate center of gravity shift to China: Mobius
China’s bid for greater influence in global financial markets will benefit from the U.K.’s decision to leave the European Union, according to Mark Mobius, who sees Asia as the “place to be” in the developing world.
While Britain’s vote to exit the EU was a “shock for a lot of people in the know” and sparked a sell-off in global markets, Asia will be seen as relatively more desirable because it’s largely isolated from Europe’s turmoil, Mobius, the executive chairman of Templeton Emerging Markets Group, said in an interview in London on Wednesday.
Mobius, 79, who’s been investing in emerging markets for more than four decades, said he’s concerned society is coming to the “dark ages of nationalism, anti-globalism and that’s bad for everyone concerned.”
China, which counts the U.S., Japan and South Korea among its biggest trading partners rather than European nations, is on course for greater internationalization of the yuan. The currency is set to be included in the International Monetary Fund’s Special Drawing Rights in October, joining the dollar, euro, yen and pound, while the government is expected to eventually unify its local and offshore yuan rates.
“We’ll find people raising money in China rather than in London or New York" five years from now, Mobius said. "If the center of gravity moves, it will have tremendous implications for the banking community, investors. Brexit will accelerate that."
The Shanghai Composite Index advanced 1.4 percent in the four days since the U.K. referendum results. That compares with a 1.5 percent drop in the MSCI Emerging Markets Index and a 0.4 percent gain in the FTSE 100 Index over the period.
The world’s biggest exporter could still be hit by any downturn in the global economy from the Brexit vote, according to calculations by Bloomberg Intelligence. Every 1 percentage-point drop in world trade could knock China’s growth in gross domestic product by 0.5 percentage point, prompting a stimulus response from the government.
China has the largest weighting in the 1.5 billion-pound ($2 billion) Templeton Emerging Markets Investment Trust, which has outperformed more than 80 percent of peers so far this year, according to data compiled by Bloomberg.
"All of this turmoil in Europe and U.K. could prompt people to say ‘Look, I’m going to diversify away from Europe and the U.K.,’" Mobius said.