KUALA LUMPUR: Emerging markets have experienced, and will continue to experience, increases in income at the national and individual levels, according to Templeton Emerging Markets fund manager Mark Mobius.
He said that in Asia, Japan was pumping money out at a rapid rate, with some of it flowing into South-East Asian countries including Malaysia.
“We expect that a lot of this money could find its way into South-East Asia. Countries including Vietnam, the Philippines, Thailand, Cambodia, Malaysia, Singapore and Indonesia could potentially benefit,” he said in his blog on Tuesday.
Mobius added that emerging market currencies like China and Thailand have been getting stronger, not weaker, and have strengthened against the US dollar over the past few years.
“The fact is that many emerging markets are not dependent on the support of the West and the developed world.
“Proponents of the idea that emerging markets are dependent on the developed market countries say that money from the US, Europe and Japan has allowed the emerging market countries to live beyond their means!
“Ironically, others say that a slowdown in the emerging world will have a negative impact on developed nations,” he noted.
On global debt, Mobius said many developed market countries have more debt in relation to their respective levels of gross domestic product, higher government deficits, and are more dependent on investors from all over the world buying their bonds.
“Additionally, the emerging market countries generally have far higher foreign reserves than the developed market countries,” he said. It is a misconception, Mobius said, that emerging market countries are incapable of managing their own economies, and that they need guidance from developed countries.
“Many in the developed markets lectured Asian nations on fiscal discipline during the 1997 Asian crisis.
“Then, the emerging markets world watched as the disaster of the US and European financial systems unfolded in 2008–2009 while many emerging countries themselves generally continued to not only survive, but prosper,” he said.
According to Mobius, a move away from both emerging equity and debt markets had emerged in
the second and third quarter.
“Not only is there still plenty of liquidity in the system, but, given the outflows that occurred, we believe many investors have reduced their weightings to emerging markets.
“I’m not saying everyone will or should increase their allocations to emerging markets, but I think that many could very well rebalance their portfolios as market sentiment should improve,” he concluded.
Source: The Star Publication
Published: Tuesday October 1, 2013