Mobius Says Emerging Markets Are Bottoming, Will Jump

Emerging-market stocks are “bottoming” and will begin a new bull market next year as interest-rate cuts spur economic growth in developing nations, investor Mark Mobius said. “We’re beginning to see this bottoming situation,” Mobius, who oversees about $26 billion in emerging-market stocks as executive chairman of Templeton Asset Management Ltd., said on Bloomberg Television from Hong Kong. “I sincerely believe that next year we’re going to be beginning the next bull phase. The amount of money going into the system has to find a home.” The MSCI Emerging Markets Index, a benchmark for equities in 24 developing nations, tumbled 53 percent this year as lower oil and metals prices reduced earnings in commodity-exporting countries and the freeze in credit markets pushed the global economy toward a recession. Mobius said he’s buying “terrific bargains all over the place” and his biggest holdings are in Asia. He’s “aggressively” purchasing Chinese stocks. Central banks from the U.S. to Japan to China cut interest rates this year to revive their economies and spur lending after financial companies worldwide reported more than $1 trillion of asset writedowns and credit losses. “As these interest rates come down globally, they will be forced to start lending, and then of course money will find its way into the economies” of emerging markets, Mobius said. ‘Reversion’ The MSCI index of emerging-market stocks has rallied 28 percent from a four-year low on Oct. 27, compared with an 8.5 percent increase in the MSCI World Index of developed-market equities in the same period. The emerging-markets gauge trades for 8.7 times its companies’ reported earnings, 53 percent cheaper than its peak valuation last year, according to data compiled by Bloomberg. The developed measure trades for 11.6 times profit. “What you are going to see is a reversion to emerging markets first because those markets are the cheapest” and the economies are growing faster, Mobius said. “There’s no reason why, going forward, they shouldn’t be the first ones to get the attention of investors.” Arnab Das of Dresdner Kleinwort said emerging markets may not recover next year. “Possibly the whole year will be a very difficult year for the entire global economy, especially emerging markets,” Das, the global head of emerging-markets research at Dresdner Kleinwort, said in an interview on Bloomberg Television in London.