Saw Marc Mobius on bloomberg around 5:00 am today and he said a new bull market has started with emerging markets. He is long some Chinese stocks and said he really likes Brazil for commodity play. I think he made the call a couple of days earlier also.
âBull Marketâ Has Begun, Templetonâs Mark Mobius Says (Update3)
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By Chua Kong Ho and Paul Gordon
March 23 (Bloomberg) -- The next âbull-marketâ rally has begun and there are bargains in every emerging market following a record slump in stocks, Templeton Asset Management Ltd.âs Mark Mobius said.
The MSCI Emerging Markets Index has jumped 26 percent since reaching a four-year low on Oct. 27, outperforming the 4.2 percent drop in the MSCI World Index and 9.5 percent decline in the Standard & Poorâs 500 Index. Emerging markets made up the 10 best-performing benchmark gauges this year, led by the 28 percent gain for Chinaâs Shanghai Composite Index.
âYou have to be careful not to miss the opportunity,â said Mobius, who helps oversee about $20 billion of emerging- market assets as executive chairman at San Mateo, California- based Templeton. âWith all the negative news, there is a tendency to hold back.â
Emerging markets are in âbetter shapeâ than developed economies, Mobius, 72, said in a Bloomberg Television interview from Hong Kong. The fund is looking for companies that are âcash-rich,â have low debt and higher dividend yields, or those that can invest for future growth yet have cash left to pay shareholders, he said.
The MSCI Emerging Markets Index today climbed the most in nearly two weeks, erasing losses for 2009, on speculation the Obama administrationâs plan to rid banks of toxic assets will help spur global economic growth.
Stocks Climb
The gauge added 3.3 percent to 571.19 at 10:07 a.m. in London. The benchmark for equities in 23 developing nations tumbled 54 percent in 2008 and lost as much as 16 percent this year on concern the first global recession since World War II would erode earnings.
Templetonâs picks include Hong Kongâs Denway Motors Ltd., PTT Plc in Thailand, Indonesiaâs Bank Central Asia, ICICI Bank Ltd. in India, Taiwan Semiconductor Manufacturing Co. and Dairy Farm International Holdings Ltd. in Singapore, Mobius said.
A companyâs participation in derivatives trading is a warning against some stock selections, Mobius said.
âNo longer are we satisfied with the explanation that âoh, itâs just plain vanilla,ââ given the huge losses incurred at financial companies, he said.
Citigroup Inc.âs analysts Markus Rosgen and Elaine Chu are among strategists who describe recent Asian stock gains as a temporary âbear-market rally.â
âLot of Bouncingâ
âYou are going to see a lot of bouncing off the bottom because thereâs a tremendous amount of uncertainty in the market,â Mobius said, âBut I have a feeling weâre at the bottom and now weâre building a base for the next bull market.â
Mobius correctly predicted in December that emerging markets will rebound before developed nations. In 1999, he was voted among the âTop Ten Money Managers of the 20th Centuryâ in a survey by the Carson Group, and in 2006 he was included in the âTop 100 Most Powerful and Influential Peopleâ by Asiamoney magazine.
Investors who poured $502 million into Asian equity funds over the past two weeks may lose out once the âbear-market rallyâ falters, Citigroup said today in a note, citing a 30 percent drop after an initial rebound in the 1997 slump. Citigroupâs Rosgen and Chu wrote in a note today they remained âskepticalâ the rally is sustainable because valuations have yet to plumb the lows seen in past recessions.
Cycle Skeptics
Fidelity Investments, the worldâs biggest mutual fund company, is among the skeptics on predictions about the timing of the market cycle.
âNo one can call the bottom in the stock market. No one managed to do it. We canât do it. We donât have a crystal ball,â Tal Eloya, a portfolio manager at Fidelity Investments, said in a briefing in Seoul today. âWe have to think long term and invest over a long-term horizon.â
Mobiusâs view that stocks will rally is shared by investor Antoine van Agtmael, who is credited with coining the term âemerging markets.â
âRelative to potential sustainable growth and quality, emerging markets today are cheaper than I have seen them at any time since I started to investâ 30 years ago, van Agtmael, who oversees about $8.6 billion as chairman and chief investment officer at Emerging Markets Management LLC, said in a phone interview March 19. âThings have gone too far down.â
Previous Recessions
Asian stock market valuations outside of Japan fell to 0.9 times book value during the 1975 and 1982 recessions, according to Citigroup. The MSCI Asia excluding Japan Index is now valued at 1.3 times book value.
Brazilian oil company Petroleo Brasileiro SA, Cia. Vale do Rio Doce, the worldâs biggest iron-ore producer, and Chinese oil producer PetroChina Co. are among the top holdings of Mobiusâs Templeton Emerging Markets Trust.
He continues to favor China Mobile Ltd., the worldâs biggest wireless carrier, as it is the âdominant player in the biggest telecommunications market in the world.â
To contact the reporter on this story: Paul Gordon in Hong Kong at
Pgordon6@bloomberg.net; Chua Kong Ho in Shanghai at
kchua6@bloomberg.net
Last Updated: March 23, 2009 07:05 EDT
