Mobius shrugs off contraction fears for EMs and DMs

Franklin Templeton’s Mark Mobius has said he does not believe there will be a recession in developed or emerging markets despite the ongoing eurozone sovereign crisis.

The emerging market investor acknowledged the developed world’s problems will inevitably have a knock-on effect on other markets, but said developing economies are resilient enough to withstand the below.

“Emerging markets are growing much faster than developed countries. That is not going to be affected – the base is much lower and the opportunities are much greater,” Mobius said.

“But we do not think, from a longer-term perspective, there is going to be a recession in developed countries and particularly not in emerging countries.”

Mobius nonetheless said the latest US policy response, the Federal Reserve’s attempt to flatten the yield curve by buying long-dated bonds, is not likely to make much difference to market sentiment.

“Operation Twist will not really have much impact, simply because it is more money printing with a different name. I do not think there will be any big change in the way markets are going to be reacting to this sort of thing”, he said.

Mobius admitted the decoupling theory remained problematic but said market volatility will be relatively short-lived.

“I do believe volatility changing around the world is short term, in other words markets tend to move together in a very short timeframe, because news travels quickly and panic travels quickly.

“But as soon as the initial reaction is over, then the markets begin to take a life of their own, because the domestic investor is becoming more and more important,” he said.

 

This article was first published on Professional Adviser Hong Kong

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