After decades at the forefront of emerging-market investment, Mark Mobius is heading into retirement betting the best is yet to come.
The 81-year-old guru predicted developing-nation stocks will set a fresh record this year. That echoed his December forecast that emerging shares will likely surpass the 2007 peak by 20 per cent, though he didn’t give a timeframe then.
“We’re going to see a pretty good market this year," Mr Mobius said in a Bloomberg Television interview as he prepares to leave Franklin Templeton Investments. Earnings momentum will determine which emerging companies perform well in an environment of rising global interest rates, he said.
Brazil, Africa, Vietnam and parts of Latin America are attractive due to their exposure to commodities or rising consumer spending, according to Mr Mobius. Commodity-related investments will even outperform technology shares, partly because they’ve been undervalued for a long time, he says. The MSCI Emerging Markets Index rose for a 11th day on Friday, set for the longest winning streak since April 2015. It’s about 6 per cent below its record high reached in 2007.
Mr Mobius has made prescient calls on some major market movements. He correctly predicted the start of a bull market that began in 2009, snapped up bargains during the Asian financial crisis after Thailand floated its currency in 1997, and bought Russian stocks as panic selling took hold in Russia in 1998. He was also one of the first institutional investors to identify Africa as a promising frontier market, setting up the Templeton Africa Fund in 2012.
“The real important change has been the political change -- they’ve moved from socialist, dictator governments to a market-economy model and that is the most incredible change that we’ve seen globally in every continent in most every country,” said Mr Mobius in the Friday interview. “The process is still continuing.”
Still, the investment thesis that Mr Mobius has come to represent has underperformed in recent years. MSCI’s emerging gauge is up 166 per cent since its 2009 low, compared with the MSCI World Index’s 224 per cent surge.
And Mr Mobius himself has had some tough times. After losing a third of his fund’s value in the October 1987 stock-market crash during his first year at Templeton, he decided to diversify his holdings from just five Asian countries to emerging markets such as Argentina, Mexico, Indonesia and Russia. The Templeton Developing Markets Trust, which he co-managed from 1991 to 2017, trailed 80 per cent of its peers over the past 15 years, Morningstar data show.
While Mr Mobius is set to step down in less than a week, this won't be the last of him as an investor -- he has even revealed his model portfolio.
"I'm not retiring," he said. "I will still continue to invest. But what I would do is and I'm doing is first of all, keep about 20 per cent in cash because markets are high. You might want to take advantage of a downturn. And then put about half of the rest in emerging markets generally, globally and the other half in commodity-oriented companies."