Templeton dismisses fears of Asian market downturn
Templeton dismisses fears of Asian market downturn
SINGAPORE (Dow Jones): Templeton Emerging Markets Fund Inc. president Mark Mobius Monday said Asia is in a new bull market with "considerable upside," dismissing fears the region's non- stop climb could come to a halt soon.
Although markets such as South Korea have about tripled in value since September last year, most Asian bourses, except for Singapore, are still a way off from their pre-crisis highs, he said.
Singapore's Straits Times Index, which was at 2201.29 midday Monday, has surpassed its previous high of 2163.11 on Feb.5 1996.
Mobius, who runs the Emerging Markets Fund, said the fund is currently tilted towards Asia, although Brazil and Mexico account for the larger individual country allocations.
He also said the fund is focused on companies in such areas as banking, where recovery is fastest, telecoms, the fastest-growing sector, and utilities.
He said Hong Kong, Indonesia, the Philippines and Thailand have greater potential to rise further.
"If you look at most of the emerging markets, not only in Asia, we're still quite a ways from the top, so I think there's considerable amount of upside as we go forward," Mobius said.
"It's probably premature for us to say that this rally is just a short-term bear market rally."
"We're now in a new bull market," he said.
Citing the company's research, the good news for investors in Asia is that most bull markets in emerging markets last three to four years, while bear markets are shorter, lasting between a year and two.
However, a correction could occur at any point, which could be between 10 percent and 15 percent. But, the slide would be temporary, he said.
High unemployment, slow progress on reforms and problems in the banking system in China could create turmoil if they run out of control, but the impact would be short-term and may not necessarily hurt Asia, Mobius said.
Even the threat of higher interest rates in the U.S. is only "a minor worry" for emerging markets, including Asia, as the spread between emerging market debt and the Fed fund rate has been narrowing, he said.
"If you take a situation like Korea, interest rates for medium-sized companies have gone from 30 percent to 10 percent, or less," he said. "You realize that 1 percent (increase in U.S. interest rates) is not going to make a big difference one way or the other."
On the continued gains and flow of funds into the region, he said low or falling interest rates and firmer domestic currencies have created a "virtuous cycle," where debt-laden Asian companies are able to reschedule and repay their debt, renewing investor confidence, he said.
He said the emerging markets fund's size has grown to around US$12 million from US$7 million during the crisis.
While some of the increase is due to stock market gains, Mobius said investors, who have turned more optimistic, are putting money into the fund.