Selloff In Equities May Continue Due To Dependence On China, Says Mark Mobius
A foreign currency dealer speaks on a telephone in a dealing room of Hana Bank in Seoul, South Korea. (Photographer: SeongJoon Cho/Bloomberg)

Selloff In Equities May Continue Due To Dependence On China, Says Mark Mobius

The selloff in global equity markets is expected to continue in the near future as global supply chains are heavily reliant on China, Mark Mobius said.

“I think the pressure will continue because the coronavirus began in China and started spreading,” the founder of Mobius Capital Partners LLP told BloombergQuint in an interview. “The virus puts big pressure on global supply chains of companies,” he said, citing the pharmaceutical sector, which sources around 80 percent of its raw materials from China.

The selloff continued for the sixth day in Indian markets with investors losing around Rs 11.5 lakh crore in market value. The S&P 500 is poised for its worst week since the global financial crisis of 2008, as it declined 10 percent from its peak in just six days.

Also read: Foreign Investors Pull Out Most Funds In A Week Since August 2015

Silver Lining For India?

The disruption in China may, however, have some good news for India as it may attract foreign companies to setup alternative manufacturing bases. “Large companies are beginning to realise that they’re very vulnerable depending only on China for their supply chains, so India will be a good division to pick up some of that business.”

The “big question”, according to the emerging markets investor, is the pace at which India responds to the opportunity and facilitates multinational firms.

When the concerns begin to ease, India looks pretty good. And if you consider just the fact that so many Indians own gold with prices climbing high, the country is in a pretty good position. Also, the relation between India and U.S. should get better after President Donald Trump’s visit. This will provide additional stimulus to the economy.
Mark Mobius, Founder, Mobius Capital Partners LLP

When asked about where new investors may park their fresh funds in such times of volatility, Mobius said one must look for companies that have a track record of consistently paying dividends. “It’s a good idea to buy if a company is paying solid dividends but has come down a lot [in terms of price].”

Watch| Mobius Sees A Silver Lining For India Amid Coronavirus Scare

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