ET Now caught up with* Mark Mobius, Executive Chairman, Templeton Asset Management, for his views on the emerging markets. Excerpts:*
Talking about India, trading at a 40% premium to other emerging market players on the PE basis, 16% premium to the long term average on price to earnings and price to book value basis also. Does this worry you? India has been trading at a premium for quite some time now. Not a huge premium, but they are generally higher level of price earnings ratios compared to let’s say Brazil or China or Russia, but it varies. So we are still able to find some very good opportunities in India and if you consider the growth prospects, some of these higher price earnings ratios can be justified. What about fund flows because there has been a surge of flows, almost $150 million to $200 million, almost on an everyday basis for the last 1 month. What kind of money is now flowing into the stocks and would you expect the FII flows to rain at the same pace for the remaining months of 2010 because people say that that is probably the big trigger, never mind the fact that the markets may be expensive but if money flows, then there would not be too many problems? Currently, there is a respite in money going into the secondary market. You must remember that the IPO activity has been fierce. There has been an incredible number of new companies coming to the market, lots of new money being raised and of course, that means that that money instead of going into the secondary market and pushing up prices has gone into the IPO activity. So until this IPO activity runs its course, you will not see an incredible increase. If indeed it is difficult to make money on the index, everybody speaks about being stock specific, what sectors or spaces in India do you think are attractive from a medium-term perspective? Of course, stock specific is extremely important, particularly in India for the reasons I have mentioned. Generally higher valuation levels mean that you have got to pick and choose those that are cheaper. I would say two sectors we still are interested in India are commodities and consumer stocks. [image: Mark Mobius] How do you read China’s move to increase the wages and the impact thereof? Can we read into this being a shift of manufacturing from China to maybe other competitive places in Asia or that would not be the case? The shift has already begun. A lot of companies have moved to Vietnam to Bangladesh and also India because wages in China have moved up, but China is now moving into a higher value added merchandise. They have imported a lot of high tech machinery which increases productivity and most importantly, increases quality and this is something that India can look at as well. Yes, there is a lot of labour in both countries but labour is not the only component. In order to be successful, you have got to increase your productivity and most importantly, increase quality of your merchandise and that takes machinery, acquiring the control etc. You have also expanded recently into Asia’s frontier markets, including Sri Lanka. Amongst the EMs and amongst the Asian markets, what are your favourites and what kind of investments have you planned in these markets? Right now if you look at our frontier market funds, the big countries are Vietnam, Kazakhstan and Nigeria. Africa in fact is growing and is important for us, and Ukraine. Those are the 4 biggest countries, but we are in Sri Lanka and a number of these other countries as well. -- EQUITY BULL -- You received this message because you are subscribed to the Google Groups ""GLOBAL SPECULATORS"" group. To post to this group, send email to [email protected]. To unsubscribe from this group, send email to [email protected]. For more options, visit this group at http://groups.google.com/group/globalspeculators?hl=en.
