Emerging markets to pick up in 2014 with India leading the way
Oct. 2 – Mark Mobius, the legendary investor and Head of Franklin Templeton, has highlighted a shift in investor interest back to emerging markets and to India in particular.
Mobius said that India’s problems would be sorted out after elections in 2014 and that he is happy about its growth trajectory. In a recent blog post titled ‘Is the Pump Primed for Emerging Market Investors?’ Mobius said that India’s growth is still positive and remains an ideal investment location.
“The International Monetary Fund (IMF) projects growth of more than 5% for the Indian Economy in 2013, which is still above most developed countries,” he said.
Mobius’ positive comments come on the tail end of foreigner investors purchasing huge volumes of Indian stocks in September. Previously, investors had sold big in the three months leading up to the end of August.
“The vulnerabilities – or rather, perceived vulnerabilities – of emerging markets have been the focus of heightened discussions over the past few months… I think too many investors have failed to put those events and developments in the proper context,” stated Mobius.
In India, the depreciating rupee had been a major cause for concern for investors. The combination of an economic slowdown and the sale of equity and bad debt made India’s currency one of the worst performing in the past few months.
According to Mobius, however, India’s sliding currency will be positive for export-oriented sectors, and will not have a large negative effective on the national economy.
“One might think that weakness in India’s currency would be a very negative thing for the stock markets, but there are companies that can potentially benefit. One example would be an outsourcing company that does most of its business outside of India and has costs in rupees, but income in US dollars,” he said.
“We believe India’s elections in the spring of 2014 could bring solutions to some of the country’s problems. From our perspective, challenges often present investment opportunities, and not always where you might expect,” Mobius further commented.
As the United State’s Federal Reserve continues its QE program, and Europe continues along the path of economic recovery, Mobius believes that growth will be revived around the globe due to the influx of liquidity.
“We believe the recent outflows from emerging markets are likely to prove temporary. Not only there is plenty of liquidity in the system, but, given the outflows that occurred, we believe many investors have reduced their weightings to emerging markets,” said Mobius.
“Looking at the global picture, we are quite optimistic. The recovery in Europe appears to be underway; in the US, the Fed’s continuation of its QE program should drive growth in many other parts of the world; and Japan is determined to ramp up activity in its economy with its own ambitious monetary policy regime. We believe many emerging markets globally should likely benefit as liquidity currently remains plentiful,” he concluded.
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