Even the normally bullish Mark Mobius says there’s worse to come for emerging markets. There’s a danger of contagion from the deteriorating situation in Turkey, and Argentina and Brazil aren’t doing well, said the veteran developing-nation investor, who left Franklin Templeton Investments earlier this year and set up Mobius Capital Partners LLP.
“We still could have some downside in the emerging markets,” Mobius said in a Bloomberg TV interview with Haslinda Amin and David Ingles. “But selectively, you have some good opportunities. Now would be a stock picker’s market.”
The MSCI Emerging Markets Index of shares has fallen around 11 percent from a 10-year high in late January as rising Treasury yields and the dollar sapped demand for riskier assets. Concerns over contagion risks are rising amid political woes that have sent the Turkish lira to a record low, while Argentina deals with its own challenges as the peso slides.
The lira tumbled as much as 5.2 percent against the dollar on Wednesday, a sign the central bank’s apparent refusal to raise rates is giving the market free rein to bet against it. Even Japanese margin traders, who until recently were doubling down on Turkey, have been cutting their losses.
For Mobius, the declines are throwing up opportunities. Indian financial stocks look attractive as “the government has come in to bail out the banks,” and the nation “has done a terrific job on outsourcing,” making technology companies potential buys, he said. There may be investment opportunities in Chinese technology stocks if the correction deepens, he said, adding that Xiaomi Corp.’s planned initial public offering is “interesting.”
Here are other places Mobius finds opportunities:
South African firms are benefiting from reforms, while sanctions against Russia will lead to some good buys in the nation’s stock market Malaysia stands to gain if the new government improves the rule of law and South Korea is getting a tailwind from improved relations with North Korea and also progress on corporate governance.