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Emerging Market Outperformance To Continue: Mark Mobius 

Veteran investor mobius continues to bet on the EM story



Mark Mobius, executive chairman at Templeton Emerging Markets Group. (Photographer: Razan Alzayani/Bloomberg)
Mark Mobius, executive chairman at Templeton Emerging Markets Group. (Photographer: Razan Alzayani/Bloomberg)

Improving investor sentiment, attractive valuations, and the search for higher yields are helping emerging markets outperform developed ones, veteran investor and Executive Chairman of the Templeton Emerging Markets Group, Mark Mobius writes in a blog post.

So far in 2016, emerging market equities have outperformed developed markets in U.S. dollar terms, and Mobius expects the trend to continue.

We see brighter prospects for investors in emerging markets compared with last year, and the long-term performance of emerging-market equities compares favorably to that of developed markets.

The rebound in commodity prices, coupled with structural changes adopted by governments, have also helped shift investor sentiment in favour of emerging markets, writes Mobius.

At the same time, many emerging-market countries have moved to lessen their dependence on commodities as drivers of growth and have diversified their economies into other areas, including information technology and other service-based sectors.

Dollar And The Fed

Another factor responsible for the EM outperformance, according to Mobius, has been the stability in the U.S. dollar. This, he argues, reduced the threat of companies not being able to repay their dollar-denominated debt. Mobius is also unperturbed by the prospect of rate hikes by the U.S. Federal Reserve.

We think emerging markets should be able to weather small and gradual increases in U.S. interest rates, which seems to be the path Fed policymakers have indicated.

The China Catalyst

Mobius writes that China has been the biggest catalyst for investment sentiment. While he admits that the economy is still plagued by many issues including oversupply of housing, and a slowdown in manufacturing, he remains optimistic on the prospects of the economy.

In our view, the fundamentals in China still look very good. The country remains one of the fastest-growing economies in the world despite a decelerated growth rate from decades past, and we remain confident in the government’s efforts to effect a broad economic rebalancing away from an export-driven model and toward one that is more domestic-oriented.

You can read the complete blog post here.