A hard Brexit will be ‘worse’ for the UK and European markets, Mark Mobius says

Investment veteran says the UK is a 'small pie of the global economy' while Europe as a whole is much bigger

“Now is the time to invest in emerging market stocks and 2019 will be even more so,” Mr Mobius. Jeffrey E Biteng / The National

Brexit uncertainty has affected UK and European markets but a hard Brexit, which could still happen if the Parliament does not ratify the latest motion on Tuesday, will be even worse for the region, emerging markets investor Mark Mobius said.

"If we see a messy hard Brexit, it would be worse," Mr Mobius, the former head of emerging markets at Franklin Templeton Investments who runs his own investment company, Mobius Capital Partners, said in Dubai on the sildelines of Global Financial Summit on Monday. "We have an incredible upset of the whole industrial sector, not only in the UK but also in Europe."

Mr Mobius made the comments ahead of British Prime Minister Theresa May securing legally binding changes to her Brexit deal on Monday with Jean-Claude Juncker, the president of the European Commission. Although the agreement agreed in Strasbourg, ahead of a crucial parliamentary vote in the UK, has somewhat strengthened the British premier's position, it does not mean she will win the necessary support of the lawmakers.

Members of the UK Parliament could turn down the Brexit deal for a second time, in a repeat of a no-confidence motion in January by 230 votes. Mrs May had promised MPs she would seek a renegotiation of an agreement with the EU that would be a blueprint to win majority support.

If Mrs May loses the parliamentary vote, it will be followed by another ballot on Wednesday to decide if the UK should leave the EU without a deal in place.

However, a loss in Tuesday's vote for the prime minister would amount to a constitutional and political crisis in the UK, which could be followed by fresh elections and a second vote on Brexit, Sir Gerry Grimstone, former chairman of Barclays Bank and Standard Life Aberdeen, told the attendees at the conference organised by the Financial Times in Dubai.

The UK is a “small pie of the global economy”, however, Europe as a whole is much bigger, and a hard Brexit will impact the continent's growth negatively, probably by half a per cent, Mr Mobius said.

A lot of the companies, he said, have begun to prepare for the potential upsets ahead. At the outset there will be a slowdown in Europe, but as companies move from the UK, Europe will prosper, he said.

“Europe will be [the ultimate] beneficiary in other words,” Mr Mobius added.

Emerging markets, which have started the year on a good footing, are at risk if the US-China trade war continues, he said. Washington and Beijing will probably reach a deal in which China would give up a lot more in the process than the US, he said.

Mr Mobius played down the chances of a recession in the US this year, or in 2020, and said that a lot depends on the outcome of a trade deal with China.

“What you are going to see this year and next is that the growth rate will be not as high as last year,” he said. “Last year you were coming from a low base.”

Mr Mobius set up Mobius Capital Partners, with former Franklin Templeton colleagues Carlos Hardenberg and Greg Konieczny, after he retired from the asset management company.

Listen: Brexit uncertainty clouds investors' outlook