China stocks to lead global recovery: TAM's Mobius

China may be the best performer this year among the BRIC nations, which include Brazil, Russia and India, even if the market undergoes “corrections,” Mobius said on Templeton's Web site. Russian stocks also look “very undervalued,” even after their gains this year, he added.

The Shanghai Composite Index has rallied 54 percent this year, the sixth-best performer among 90 stock indexes tracked by Bloomberg. MSCI's emerging markets gauge has gained 39 percent, outpacing the 7.5 percent increase in the World Index.

“We will face volatility and there will be corrections along the way,” said Mobius, who helps oversee about $20 billion of emerging-market assets as executive chairman of Templeton. “We do, however, expect China to continue to lead the global market recovery.”

The MSCI Emerging Markets Index has climbed 43 percent since Mobius predicted on March 23 that the next “bull-market rally” has begun.

In China, the government has the resources to add to a 4 trillion yuan ($585 billion) stimulus package intended to restore growth in the world's third-largest economy, Mobius said. Gross domestic product will expand 7.5 percent this year, according to economists surveyed by Bloomberg News last month, up from a 7.1 percent forecast in February.

China's economic outlook is the “brightest” in Asia and growth may exceed investor expectations, Stephen Ma, a fund manager at Fidelity International said today in Seoul.

Spending Enough?

Still, government spending may not be sufficient to sustain growth in the second half, Wendy Liu, Hong Kong-based head of China research at RBS ABN Amro, told Bloomberg Television.

“Growth so far this year has been good, but that's primarily because of the fiscal spending from the central government,” Liu said. “Second half, you do have concerns whether consumption can hold up and private sector fixed-asset investment can follow through.”

There is a “possibility” that global equity markets will fall to lows reached in March because of unexpected events, such as war on the Korean peninsula or a global flu pandemic, and as economies worldwide remain “fragile,” Mobius added.

The emerging markets gauge is up 66 percent from its March 2 low, while the MSCI gauge of developed countries has rallied 44 percent since falling on March 9 to the lowest in almost 14 years.

Buying Opportunity

Any decline in share prices will be an opportunity to buy stocks “cheaply,” Mobius said, adding that China, Thailand, Brazil, Mexico, Turkey and South Africa offer “good value.”

Russian stocks are also “cheap,” with the MSCI Russia Index valued at 6.8 times earnings at the end of May, Mobius said. The gauge has gained 68 percent this year, while the dollar-measured RTS Index has climbed 78 percent, helping Russia to the world's second-best gain.

The country will also benefit as commodity prices increase over the long term, supported by greater demand from developing countries and “relatively inelastic supply,” Mobius said.

Subscribe to The China Post and save 25%. Click here

SharePrintEmail

Write a Comment

Terms

Enter your comments - 3000 characters max

Type in image code

Submit

 Receive China Post promos
 Respond to this email