This article was published in the 10/21/08 edition of the Financial Times
Emerging economies have not lost their appeal
What I find interesting about this article is not only what it did state,
but what it did not state. Even on this date, October 21st 2008, there is no statement that world economies (as measured by GDP) will collapse as the headlines of the day might have one believe. Writer Mark Mobius has forecast GDP growth of +1.00 in 2009 for the developed economies and +5.00% for emerging economies. Hardly a depression. Given Mr. Mobius’s stature in the emerging markets, (see below) I place weight to his opinion.
This is what sound research and discipline will do, remove the emotion and panic of today’s headlines. This is not to say, these are not challenging times, they are. I think Mobius also frames the debate much better as to how developing economies will fair this time around with a slowing US economy.
Mobius’s last paragraph really hits the point,
History has shown us that the best time to buy is when everyone is
despondently selling. But also, as someone once said: “This time it’s
different” are the most expensive words in the world.
The article below…
Emerging economies have not lost their appeal
By Mark Mobius executive chairman of Templeton Asset Management
Published: October 21 2008 03:00 | Last updated: October 21 2008 03:00
Since I spoke at EuroFinance’s annual cash management conference in Barcelona earlier this month, global financial markets have continued to experience significant declines all over the world, leading some commentators to suggest that things could get as bad as the Great Depression in the 1930s.
Despite unprecedented and co-ordinated actions by governments and central banks around the world to boost liquidity and support the financial sector, investors remain sceptical.
Emerging markets, however, offer a number of important reasons why investors should adopt a positive view for the long-term.
While global growth has slowed, emerging markets are still expected to grow at a much faster rate than developed markets. Predicted growth for emerging markets is an average of 5 per cent in 2009, compared with 1 per cent expected in developed markets. Of course that is not to say that a prolonged slowdown in the US economy will not affect emerging markets, but the impact will be much less than would have been the case 10 years ago.
In the past, the US was the largest importer of goods from Asia and other emerging economies, but trade in emerging market countries is now much more diversified, with many exporting to new markets, decreasing their dependence on the US. Today, Asia exports more to China than to the US. While the US is still the largest and most influential economy, this influence has gradually diminished as other economies continue to grow at much faster rates.
Although the slowdown in the US has hurt Asian exports to some extent, economies in Asia are becoming more domestically driven, and indeed the services sector is gaining importance, especially in China and India. This, combined with government expenditure in areas such as infrastructure as well as private domestic consumption means that emerging economies should be able at least partially to offset the decline in growth resulting from slowing exports with an increased economic independence.
The accumulation of foreign exchange reserves also puts emerging economies in a much stronger position to weather external shocks with reserves, for example, in China, totalling more than $1,900bn.
Most importantly for value investors, the current valuations of emerging markets remain attractive. The benchmark MSCI Emerging Markets index is trading at a price/earnings ratio of 10.7, down from 18.5 a year earlier. They are in fact even cheaper than developed markets such as the US which is trading at a p/e of 16.5. Markets such as Turkey and Russia are down to single-digit p/e’s, making them especially appealing. Of course that is not to say that this is definitely the bottom – that would be impossible to predict. However, taking a long-term view, these valuations are certainly attractive.
In addition to emerging markets, frontier markets are looking interesting and could become tomorrow’s emerging markets. We opened an office in Vietnam earlier this year to allow us to study closely the companies there and in the Mekong region.
Additionally, the larger frontier markets such as Slovenia, Romania, Croatia, Kazakhstan and Ukraine are also beginning to look good.
The Middle East is a region of great interest and will be the focus of continued research. In fact, we recently also opened a new office in Dubai to allow us to capture the growing opportunities in that region.
We are impressed by the Middle East’s economic performance and believe that the potential for economic growth and development remains considerable, especially if the current trend toward the implementation of political and economic reforms remains on course.
The markets may continue to be volatile at times, but the underlying fundamentals of emerging markets remain intact. Currently markets around the world are substantially down and we are probably nearing levels of maximum pessimism.
History has shown us that the best time to buy is when everyone is despondently selling. But also, as someone once said: “This time it’s different” are the most expensive words in the world.
The writer is executive chairman of Templeton Asset Management
Who is Mark Mobius? Mobius pioneered emerging market investing
for US Investors decades ago. Click the link below for more information.
http://en.wikipedia.org/wiki/Mark_Mobius
Listed as one the “Top 10 Gurus” by the Times of London
Industry Recognition
Because of his in-depth knowledge of emerging markets, Mobius has been a key figure in developing international policy for emerging markets. In 1999, he was selected to serve on the World Bank’s Global Corporate Governance Forum as a member of the Private Sector Advisory Group and as co-chair of the Investor Responsibility Taskforce.[5] He has also been featured as a speaker [6] for the World Bank in 1999 and has given seminars for many other groups, including for the Asian Development Bank in 2002[7] and as a motivational speaker for the London Speaker Bureau[8].
As a recognized industry expert, Mobius appears frequently on financial industry television shows and networks, including BLOOMBERG, CNBC, MSNBC, and CNN, and has given/written thousands of interviews and opinion pieces over the years. A comprehensive listing would not be appropriate for this article, but Google has compiled many thousands of hits depending on the search terms used: “mark mobius” interview, “mark mobius” notes, and “mark mobius” talkfor further reading. This is included in this article just to show how prolific and influential he has been for over 40 years in the industry.
Mobius has earned numerous accolades from the investment industry.[2] Among them are:
* One of “Top 100 Most Powerful and Influential People” by Asiamoney magazine. 2006.
* “Emerging Markets Equity Manager of the Year 2001″ by International Money Marketing, 2001.
* “Ten Top Money Managers of the 20th Century” by the Carson Group, 1999.
* “Number One Global Emerging Market Fund” by Reuters, 1998.
* “1994 First in Business Money Manager of the Year” by CNBC, 1994.
* “Closed-End Fund Manager of the Year” by Morningstar, 1993.
* “Investment Trust Manager of the Year 1992″ by Sunday Telegraph, 1992.
Mobius has also been given various humorous nicknames over the years, including the “Pied Piper of emerging markets”[9], the “dean of emerging markets”[10], a world “globetrotter”[11][12], and the Yul Brynner of Wall Street[13][14] due to his signature bald head look.
