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Notes from Mark Mobius
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15 августа, 01:33

Las Vegas, Macau and the Future of Work

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A few months ago I was honored to speak at the prestigious SALT investment conference in the US city of Las Vegas. It had been quite a while since I’d been to Las Vegas. The activity and energy of the place really surprised me, even though I don’t gamble. Las Vegas was once the casino Investment Adventures in Emerging Markets - Notes from Mark Mobius Mark Mobius, Ph.D., executive chairman of Templeton Emerging Markets Group, joined Templeton in 1987. Currently, he directs the Templeton research team based in 15 global emerging markets offices and manages emerging markets portfolios. As he spans the globe in search of investment opportunities, his “Investment Adventures in Emerging Markets” blog gives readers a taste for what he does, when, where, why and how. Dr. Mobius has written several books, including “Trading with China,” “The Investor’s Guide to Emerging Markets,” “Mobius on Emerging Markets,” “Passport to Profits,” “Equities—An Introduction to the Core Concepts,” “Mutual Funds—An Introduction to the Core Concepts,” ”The Little Book of Emerging Markets,” and “Mark Mobius: An Illustrated Biography."

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03 августа, 00:15

Mid-Year Outlook: The Resurgence of Emerging Markets

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The first half of 2017 has been bright for emerging markets, generally speaking. My colleagues Stephen Dover, chief investment officer of Templeton Emerging Markets Group, Chetan Sehgal, director of Global Emerging Markets/Small-Cap Strategies and Carlos Hardenberg, senior vice president, director of Frontier Markets Strategies, examine factors boosting sentiment this year and point to some themes and sectors we are excited about in this space going forward. Investment Adventures in Emerging Markets - Notes from Mark Mobius Mark Mobius, Ph.D., executive chairman of Templeton Emerging Markets Group, joined Templeton in 1987. Currently, he directs the Templeton research team based in 15 global emerging markets offices and manages emerging markets portfolios. As he spans the globe in search of investment opportunities, his “Investment Adventures in Emerging Markets” blog gives readers a taste for what he does, when, where, why and how. Dr. Mobius has written several books, including “Trading with China,” “The Investor’s Guide to Emerging Markets,” “Mobius on Emerging Markets,” “Passport to Profits,” “Equities—An Introduction to the Core Concepts,” “Mutual Funds—An Introduction to the Core Concepts,” ”The Little Book of Emerging Markets,” and “Mark Mobius: An Illustrated Biography."

26 июля, 02:25

An Active Look at Small-Cap Investing

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At Templeton Emerging Markets Group, we believe emerging market (EM) small-capitalization (small-cap) stocks represent an attractive proposition in the current investment climate. However, there are some common misconceptions regarding the asset class that conceal key strengths we believe an active manager could capitalize on. Here, I join my colleagues Stephen Dover, chief investment officer of Templeton Emerging Markets Group, and Chetan Sehgal, director of Global Emerging Markets/Small-Cap Strategies, to talk about investing in this space. Investment Adventures in Emerging Markets - Notes from Mark Mobius Mark Mobius, Ph.D., executive chairman of Templeton Emerging Markets Group, joined Templeton in 1987. Currently, he directs the Templeton research team based in 15 global emerging markets offices and manages emerging markets portfolios. As he spans the globe in search of investment opportunities, his “Investment Adventures in Emerging Markets” blog gives readers a taste for what he does, when, where, why and how. Dr. Mobius has written several books, including “Trading with China,” “The Investor’s Guide to Emerging Markets,” “Mobius on Emerging Markets,” “Passport to Profits,” “Equities—An Introduction to the Core Concepts,” “Mutual Funds—An Introduction to the Core Concepts,” ”The Little Book of Emerging Markets,” and “Mark Mobius: An Illustrated Biography."

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14 июля, 02:26

Emerging Markets Second-Quarter 2017 Recap: The Streak Continues

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Templeton Emerging Markets Group has a wide investment universe to cover—tens of thousands of companies in markets on nearly every continent. While we are bottom-up investors, we also take into account big-picture context. Here, I share the team’s overview of what happened in the emerging-markets universe in the second quarter of 2017, including some key events, milestones and data points to offer some perspective. Overview Emerging-market (EM) stocks outperformed their developed-market counterparts for the sixth consecutive month in June, with the MSCI EM Index returning 1.1%, compared with a 0.4% gain in the MCSI World Index.1 For the quarter as a whole, the MSCI EM Index was up 6.4%, while the MSCI World Index was up 4.2%. Key drivers of emerging-market performance included encouraging economic data in China, investor inflows and corporate earnings growth. Frontier markets outperformed developed markets and performed in line with their emerging-market counterparts. The MSCI Frontier Index gained 6.3% in US-dollar terms over the quarter.2 Nigeria, Sri Lanka and Kenya were among the top-performing frontier markets. An improvement in foreign-exchange liquidity coupled with undemanding valuations drove stock prices in Nigeria. However, equity prices in Bahrain and Oman declined. Commodity prices declined during the second quarter despite a late-June rally. West Texas Intermediate (WTI) crude oil spot prices declined 9% during the quarter.3 At the end of June, however, oil prices recorded their strongest rally of 2017 after US producers appeared to curtail their drilling activity and government data showed a sharp drop in US gasoline supplies as summer demand picked up. Iron-ore prices rallied in June after buckling under tighter Chinese credit earlier in the quarter. Emerging-market currencies appreciated slightly against the US dollar. Central European currencies such as the Czech koruna, Hungarian forint and Polish zloty were among the top-performing currencies as the stronger euro offered support. Meanwhile, the Argentine peso, Chilean peso and Russian ruble depreciated. Country Updates and Key Developments Asia was the top-performing region for the quarter with equity markets in China, South Korea and Taiwan among the best market performers. The MSCI Taiwan Index reached a 17-year high in June,4 with the information technology (IT) and financials sectors driving gains. South Korea’s major equity index reached a record-high level in June amid foreign buying and strength in IT and health care companies. The IT sector was also a key driver of performance in China. Index-provider MSCI’s announcement to add mainland A-shares (large Chinese mainland shares) to its indexes next year aided overall market sentiment. As active managers, we do not follow the index. We continue to find value in Internet-related and consumer-oriented stocks in China. The Chinese government remains focused on its “Internet Plus” initiative where IT will play a key role in fueling China’s next stage of economic growth. In the consumer area, we view the automobile market favorably, as penetration rates remain quite low versus developed markets. Entertainment is another area that is interesting to us. For example, in China and in emerging markets generally, we see a rapid growth of multiplexes and movie theaters, along with other types of entertainment venues. Elsewhere, international ratings agency Standard & Poor’s raised Indonesia’s credit rating to investment grade, bringing it in line with Moody’s and Fitch. The news provided a lift to Indonesian equities. Generally disappointing first-quarter corporate earnings weighed on equities in Thailand, while the materials, telecommunications and energy sectors underperformed in Malaysia. Despite posting gains, equity markets in Thailand, Malaysia and India lagged their regional peers. Challenges in the implementation of the Goods and Services Tax (GST) and profit-taking cooled the Indian market in June, but India’s market remains quite strong year-to-date. Moderating inflation data in June opens the door to potential central-bank easing, and we believe the implementation of the GST should benefit many companies. While India still faces some bureaucratic barriers, we are optimistic about India’s potential and the case for investing there. In Latin America, market-friendly political news and hints of an end to monetary tightening raised investor confidence in Mexico. Positive growth expectations helped drive outperformance in Peru. MSCI’s decision to delay the reclassification of Argentina to emerging-market status in June led to a market correction during the month, but the MSCI Argentina Index ended the quarter in positive territory. Meanwhile, profit-taking led the Chilean market to end the quarter with a decline. In Eastern Europe, Russia was among the weakest performers amid investor concerns that lower oil prices could impact 2017 corporate-earnings growth. Additional US sanctions also worried many investors. Macroeconomic data during the quarter pointed towards a recovery, however, with gross domestic product (GDP) expanding in the first half of 2017 after two consecutive years of contraction. Energy, financials and IT companies continue to look attractive to us from a value standpoint. We also think the energy sector provides good dividend yield potential in a low-oil-price environment, while financials and IT companies provide exposure to Russia’s domestic economy with attractive growth prospects and relatively cheap valuations. Turkey was one of the region’s top performers. Stronger-than-expected first-quarter GDP growth, a stronger lira and the passing of the referendum on the package of constitutional amendments helped buoy the market. Hungary, Poland and the Czech Republic also outperformed as appreciation in their domestic currencies offered support. In the MENA region, MSCI said it would consider upgrading Saudi Arabia to emerging-market status (the decision would be announced in June 2018), which could attract more investor flows. The news spurred a rally in Saudi stocks in late June, along with the naming of Prince Muhammad bin Salman as crown prince. Qatar’s stock market declined after six Arab countries cut diplomatic ties in June for allegedly supporting terrorism. Our Outlook We believe emerging markets continue to offer superior growth potential compared with developed markets. The long-term trend of increased consumer penetration and improving affluence, leading to a shift to more premium products and services, should continue to bode well for these markets in the future. Consumer demand growth is a prominent investment thesis within our portfolios. We look... Investment Adventures in Emerging Markets - Notes from Mark Mobius Mark Mobius, Ph.D., executive chairman of Templeton Emerging Markets Group, joined Templeton in 1987. Currently, he directs the Templeton research team based in 15 global emerging markets offices and manages emerging markets portfolios. As he spans the globe in search of investment opportunities, his “Investment Adventures in Emerging Markets” blog gives readers a taste for what he does, when, where, why and how. Dr. Mobius has written several books, including “Trading with China,” “The Investor’s Guide to Emerging Markets,” “Mobius on Emerging Markets,” “Passport to Profits,” “Equities—An Introduction to the Core Concepts,” “Mutual Funds—An Introduction to the Core Concepts,” ”The Little Book of Emerging Markets,” and “Mark Mobius: An Illustrated Biography."

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13 июля, 13:32

Emerging Markets Second-Quarter 2017 Recap: The Streak Continues

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Templeton Emerging Markets Group has a wide investment universe to cover—tens of thousands of companies in markets on nearly every continent. While we are bottom-up investors, we also take into account big-picture context. Here, I share the team’s overview of what happened in the emerging-markets universe in the second quarter of 2017, including some key events, milestones and data points to offer some perspective. Investment Adventures in Emerging Markets - Notes from Mark Mobius Mark Mobius, Ph.D., executive chairman of Templeton Emerging Markets Group, joined Templeton in 1987. Currently, he directs the Templeton research team based in 15 global emerging markets offices and manages emerging markets portfolios. As he spans the globe in search of investment opportunities, his “Investment Adventures in Emerging Markets” blog gives readers a taste for what he does, when, where, why and how. Dr. Mobius has written several books, including “Trading with China,” “The Investor’s Guide to Emerging Markets,” “Mobius on Emerging Markets,” “Passport to Profits,” “Equities—An Introduction to the Core Concepts,” “Mutual Funds—An Introduction to the Core Concepts,” ”The Little Book of Emerging Markets,” and “Mark Mobius: An Illustrated Biography."

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05 июля, 22:14

Looking Back 20 Years: Lessons of the Asian Financial Crisis

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July marks the 20th anniversary of what was considered to be the start of the Asian Financial Crisis (AFC), which sent shockwaves through the region and beyond. The crisis was thought to have started in Thailand in the summer of 1997, although its roots stem from even earlier systemic problems, namely in the financial sector. Thailand’s currency, the baht, had been pegged to the US dollar, but on July 2, 1997, the government shifted to a floating exchange-rate system, effectively devaluing it. With Thailand’s foreign exchange reserves drained from months of defending against currency speculation, economic peril ensued. The same currency speculators pounced, further exacerbating declines. As an investor in 1997, it was a very difficult time. In the lead up to the crash, we’d heard from a number of Thai companies that were finding it cheaper to borrow in US dollars because the interest rate on US-dollar loans was so much lower than Thai-baht loans. Of course we were a little concerned about currency risk, but suggestions from the Bank of Thailand that it would defend the value of the baht if required, appeared to reassure companies. Unfortunately when the value of the baht collapsed, some of these companies found themselves in deep trouble. A number of high-flying companies loaded with debt went bust and, of course the Thai stock market (in which we were invested) headed south very fast. This proved to be a good lesson in the benefits of diversification, since although the Thai market declined and selling at a fair price was difficult, there were other investments we had around the world to give us liquidity in our strategies if it was needed. The good news was that redemptions were not excessive and most of our investors took the long-term view that we encourage. At a personal level, however, it was disastrous for so many individuals in Thailand and other countries. One top executive at a prominent company in Thailand was bankrupt as a result of the crisis so he took up selling sandwiches on the street to make money. The crisis in Thailand spread throughout Asia and when various vulnerabilities were exposed in the affected countries, confidence in emerging markets in general declined. The crisis also had a spillover effect on markets outside of Asia, with Russia and Latin America facing crises of their own soon after, dealing emerging markets yet another blow. Looking back 20 years later, we can see in hindsight the mistakes that occurred. The Thai central bank attempted to control exchange rates and did not have enough foreign exchange reserves to carry out that protection. Unfortunately, other central banks made the same mistake. Many central banks at that time conveyed that there would be no problem controlling exchange rates and stated devaluations would not occur. Since interest rates in US dollars were so much lower than local currency rates, companies and individuals borrowed in US dollars, thinking that since their local currencies would hold steady, there would be little to no foreign-exchange risk. Of course, in the end, the central banks could not hold their respective currencies steady and the massive devaluation of local currencies against the US dollar wiped out companies. Individuals living in those countries suffered as well, not only from investment losses but also from the ripple effects of economic collapse. Companies folded and people lost jobs. Sadly, there were many suicides. In Thailand, it was reported that visits to Buddhist temples tripled. In my view, the World Bank and other multilateral institutions also made a major mistake in dealing with the crisis. Instead of providing financing for debt relief in order for the economies to continue to function, they imposed harsh measures on the governments. They required them to cut budgets and allow banks in their countries to collapse. This was thought to have exacerbated the crisis and extended the problems. In contrast, the US Federal Reserve took a much different approach in bailing out financial institutions during the subprime crisis a decade later, rather than let the system collapse. As I see it, the key takeaway from the AFC is that central banks and governments should not try to go against market forces and control foreign exchange rates. I also believe governments and individuals should not take out debt in currencies other than the currency which is their main source of income without fully understanding the risks behind it. Many countries, companies and individuals in emerging markets learned the harsh lessons of the AFC. Since then, many emerging markets have built up foreign reserves and reduced foreign debt loads in relation to gross domestic product. Because of this and other reasons, I think the outlook for emerging markets today looks very good. Of course, such crises are part-and-parcel of a free capital-market system, and should be expected. No amount of government regulation and oversight can guarantee another market crisis won’t happen. The scars of the AFC and the more recent Global Financial Crisis that swept developed markets in 2007-2009 still remain in the minds of many investors. We have seen investor panic at any sign of uncertainty, often perhaps irrationally at times. And many investors continue to see all emerging markets the same—with the same fundamentals. I think this is a mistake. While some emerging markets do remain vulnerable, many others are doing quite well and have pursued prudent policies that have led to economic growth and prosperity. It is our job to differentiate the individual investment opportunities we see on a case-by-case basis, and use times of inevitable panic to pick up bargains where we see sound footing and good prospects. Thailand: 20 Years Later We continue to believe in Thailand’s long-term prospects and think structural catalysts, particularly the government’s recent emphasis on infrastructure, support the investment case. In our view, the Thai equity market is well-supported by healthy economic and political development that could result in an improved growth outlook for Thailand over the medium and longer term. We continue to like consumer... Investment Adventures in Emerging Markets - Notes from Mark Mobius Mark Mobius, Ph.D., executive chairman of Templeton Emerging Markets Group, joined Templeton in 1987. Currently, he directs the Templeton research team based in 15 global emerging markets offices and manages emerging markets portfolios. As he spans the globe in search of investment opportunities, his “Investment Adventures in Emerging Markets” blog gives readers a taste for what he does, when, where, why and how. Dr. Mobius has written several books, including “Trading with China,” “The Investor’s Guide to Emerging Markets,” “Mobius on Emerging Markets,” “Passport to Profits,” “Equities—An Introduction to the Core Concepts,” “Mutual Funds—An Introduction to the Core Concepts,” ”The Little Book of Emerging Markets,” and “Mark Mobius: An Illustrated Biography."

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05 июля, 16:34

Looking Back 20 Years: Lessons of the Asian Financial Crisis

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July marks the 20th anniversary of what was considered to be the start of the Asian Financial Crisis (AFC), which sent shockwaves through the region and beyond. The crisis was thought to have started in Thailand in the summer of 1997, although its roots stem from even earlier systemic problems, namely in the financial sector. Investment Adventures in Emerging Markets - Notes from Mark Mobius Mark Mobius, Ph.D., executive chairman of Templeton Emerging Markets Group, joined Templeton in 1987. Currently, he directs the Templeton research team based in 15 global emerging markets offices and manages emerging markets portfolios. As he spans the globe in search of investment opportunities, his “Investment Adventures in Emerging Markets” blog gives readers a taste for what he does, when, where, why and how. Dr. Mobius has written several books, including “Trading with China,” “The Investor’s Guide to Emerging Markets,” “Mobius on Emerging Markets,” “Passport to Profits,” “Equities—An Introduction to the Core Concepts,” “Mutual Funds—An Introduction to the Core Concepts,” ”The Little Book of Emerging Markets,” and “Mark Mobius: An Illustrated Biography."

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27 июня, 22:05

China: Building Roads to the Future

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China is forging new global connections and expanding trade and market access in many ways. The country does seem to be opening its capital markets and working to become more transparent. We have seen the success of stock linkages between mainland China and Hong Kong, and recently, a new bond market connection has been announced. I think index-provider MSCI’s recent announcement to include large Chinese mainland shares in its Emerging Markets Index1 beginning next year represents an important vote of confidence and a recognition that China’s growth and capital market size must be taken into account by global investors. China’s ancient “Silk Road” trade route is thought to be traced back to the Han Dynasty more than 2,000 years ago. The importance of silk trading to the region inspired the name of this network connecting land and sea trade routes linking China, Central Asia, the Arab world and stretching into the African and European continents. In 2013, Chinese President Xi Jingping formally announced plans for a modern system of networks including railroads, ports, pipelines and even electronic information highways. The “One-Belt One-Road” (OBOR) initiative aims to transform economic and diplomatic interests in the region, taking shape in the form of investments in the various countries the program encompasses. In 2014, China established a special, multi-billion-dollar fund to finance a variety of infrastructure projects along the OBOR routes, creating new economic corridors. The initiative is thought to be perhaps the largest of its type initiated by just one country. The OBOR currently spans more than 60 countries. The sea-route part of the program includes ports along China’s coast, Hanoi in Vietnam, Kuala Lumpur in Malaysia, Jakarta in Indonesia, Kolkata in India, Colombo in Sri Lanka, Nairobi in Kenya and Athens in Greece, where the Chinese have acquired the port of Piraeus. One indication that the Chinese are putting words into action was demonstrated to me when I recently visited Sri Lanka. Right on the Colombo waterfront was a spanking new giant container port the Chinese had built, capable of handling the world’s largest container vessels. A land-route portion of the project will start in Xian and Urumqi in the West of China, then travel through Kazakhstan and Uzbekistan and Tajikistan in Central Asia, then Tehran in Iran, Ankara in Turkey, Moscow in Russia and Rotterdam in the Netherlands. Of course, a number of other countries such as Pakistan and Georgia will likely be impacted as trade and energy cooperation expands throughout various areas in the region. In mid-May of this year, the Chinese hosted a high-level OBOR summit. A number of new investments were announced at the summit, augmenting what already has taken place since 2013 when the OBOR was launched. At the summit, China pledged more than $100 billion in new investments. Officials also announced that Chinese companies had built 56 economic cooperation zones in more 20 countries. The Chinese are emphasizing investments in the South Caucasus and in Central Asia, as those areas represent a strategic link between China and Europe. Agreements made with Uzbekistan represent just one example of the substantial impact of Chinese investments. The two countries have made numerous, multi-billion-dollar agreements including energy infrastructure and a gas supply contract to China. Transport corridors connect a railway system spanning China, Kyrgyzstan, Uzbekistan and Afghanistan, and also connect to seaports in Pakistan and Iran. At the conference underlining the importance of the Caucasus countries, China also signed a free-trade agreement with Georgia. One attraction of Georgia is the Association Agreement Georgia has with the European Union (EU). Chinese joint ventures in Georgia would thus be eligible for preferential treatment of its products within the EU markets. In my view, the OBOR program will likely benefit many Chinese companies, but has widespread implications for other countries in the region and beyond. While some countries in Asia are likely to see the biggest initial impact, eventually I also see Africa as a key beneficiary. Even though African countries are not in the direct path of the “One Road” they will be included in the sea “One Belt” projects with various infrastructure improvements already underway. Countries in Europe could also benefit once the program is completed and new trade and investment linkages expand. While China has established this program to bolster its economic position and power, I think the Chinese are going to be careful to not unduly favor Chinese companies involved in various OBOR projects. The bottom line is that clearly, China wants more global trade and many countries and companies involved in these efforts will benefit. Of course, others may not benefit at all, which emphasizes the importance of being highly selective as an investor in these markets. A Note on China and Finance While some observers see the OBOR program as likely to benefit China and many other countries in a number of ways, there are also some risks. China has put a consortium of banks and funds together to help finance OBOR-related projects but many investors remain concerned about the state of China’s financial system. China does face domestic challenges as it continues to transition its economy away from an export-focused model. China’s pace of growth has been slowing a bit in recent years and concerns about overcapacity in certain sectors has sprung up. In particular there has been considerable concern about so-called “shadow banking” in China, which refers to financial transactions outside the formal system that lack a strong safety net. This may be one of the reasons why a major ratings agency recently downgraded China, even though the country still maintains an investment-grade rating. There are signs the Chinese government is moving to clean up some of the excesses in the financial sector, particularly in regard to sales of wealth-management products—a key component of shadow banking. In June, Chinese authorities ordered banks to suspend business dealings with a Chinese holding company that had a variety of financial services subsidiaries. It was announced that the company’s head was “temporarily unable to fulfill his role for... Investment Adventures in Emerging Markets - Notes from Mark Mobius Mark Mobius, Ph.D., executive chairman of Templeton Emerging Markets Group, joined Templeton in 1987. Currently, he directs the Templeton research team based in 15 global emerging markets offices and manages emerging markets portfolios. As he spans the globe in search of investment opportunities, his “Investment Adventures in Emerging Markets” blog gives readers a taste for what he does, when, where, why and how. Dr. Mobius has written several books, including “Trading with China,” “The Investor’s Guide to Emerging Markets,” “Mobius on Emerging Markets,” “Passport to Profits,” “Equities—An Introduction to the Core Concepts,” “Mutual Funds—An Introduction to the Core Concepts,” ”The Little Book of Emerging Markets,” and “Mark Mobius: An Illustrated Biography."

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27 июня, 15:16

China: Building Roads to the Future

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China is forging new global connections and expanding trade and market access in many ways. The country does seem to be opening its capital markets and working to become more transparent. We have seen the success of stock linkages between mainland China and Hong Kong, and recently, a new bond market connection has been announced. I think index-provider MSCI’s recent announcement to include large Chinese mainland shares in its Emerging Markets Index1 beginning next year represents an important vote of confidence and a recognition that China’s growth and capital market size must be taken into account by global investors.

12 июня, 21:03

Readers’ Questions Answered

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While I can’t always respond to each of your questions directly, I do enjoy hearing from my readers and followers and value your feedback. I am quite delighted to see people from all over the world reaching out via my blog, Twitter and LinkedIn. Keep them coming! Here are a few—hopefully one of my responses will answer a question of yours. Q: I read your recent frontier markets blog and you didn’t mention Bangladesh. Can you share your thoughts on opportunities therein? Nazib in Bangladesh (via Twitter) A: We view Bangladesh as one of the more exciting frontier markets and now that Pakistan has been upgraded and moved out of the MSCI Frontier Markets Index to the MSCI Emerging Markets Index, we think Bangladesh will become more important. We have been active there and continue to look for potential investment opportunities. I really love Bangladesh and its people. During my most recent visit I had an opportunity to travel to the countryside and visit various factories and farms, and found the people so friendly and hospitable. On the farms and in the factories I could see how skillful and hardworking the people are and how gradually they are improving their standard of living. Q: I don’t want to sound naïve, but is populism like a cycle or phase society goes through? For example, capitalism works well in providing jobs and efficient allocation of resources. But over time, many workers get fed up seeing their labors amounting to very little in way of achievement and certain candidates appeal to them, sprouting populism, until the policies fail and reforms are needed. Your thoughts? – Walter in the United Kingdom (via LinkedIn) A: That’s certainly not naïve sounding because it is an issue which is challenging all of us. The multilateral agencies such as the World Bank, International Finance Corporation and others realized in the 1970s that a market-oriented system was the best approach to achieve economic growth and lift people out of poverty. As you pointed out, a market-based system is great for efficiently allocating resources. However, the drawback is the rapid growth in wealth is usually not distributed equally, so we end up with great gaps in income, not only within one country but all over the planet. The socialist/communist answer to the issue is for the state to take from the rich and give to the poor. However, this has led many of the resourceful capitalists—the allocators of capital—to abandon their efforts and sometimes even leave the country in question. The result is that less wealth is generated. Clever politicians feed off the anger of the “have-nots” and appeal to them with promises of higher wages, free housing, free food, etc. etc.  That is called populism. Unfortunately, once populist-oriented politicians have grasped power, they often tend to enrich themselves and squander their country’s wealth. There is no easy answer and I think a combination of philosophies is probably what we need. China is attempting this combination of capitalism (where market forces determine the allocation of capital) and socialism. The goal is for the state to ensure a better distribution of benefits to all the population. Of course, no system is perfect, and it’s no secret that the challenges are great there. China’s recent aggressive anti-corruption program is an indication of the problem. Nevertheless, we remain optimistic about China’s prospects. Q: What are your thoughts on Pakistan? Any plans to visit? – Imran in Pakistan (via LinkedIn) A: From an investor standpoint, we think Pakistan is really doing great. Its graduation from the MSCI Frontier Markets Index to the MSCI Emerging Markets Index has energized the market, so shares of many Pakistani companies have appreciated nicely so far this year. We are happy about that because we had been investing in Pakistan for many years before this change. I have not visited Pakistan recently but would like to do so. One of our analysts was recently there and came back with favorable reports and recommendations for us to consider. I think Pakistan is on its way to higher growth, not only because of the reforms taking place there but also because of its link with China. China is helping to improve Pakistan’s infrastructure in connection with China’s “One-Belt-One Road” program which would link Asia by road and rail to the Middle East through Pakistan. We see this as a great idea and one that could benefit Pakistan. Q: It would be great if you could elaborate on the aspect of mobile finance. While companies are working hard on it, the technological and legal infrastructure to speed up mobile finance and other kinds of cashless payment still need a lot of development in emerging (and of course frontier) markets.- Hanh in Singapore (via LinkedIn) A:  Mobile finance is growing quickly all over the world. In some countries where laws were not in place to limit or restrict money transfers and other such financial activities (such as in Kenya), mobile finance has exploded. Generally in countries where there are no complex banking and finance laws (as we generally find in developed countries) the potential for rapid introduction of mobile finance is excellent. So, we have seen many emerging-market countries surpassing the developed markets in this regard. Nevertheless, cashless payment is developing at high speed. I experience electronic payment systems nearly everywhere in the world I visit, particularly in Asia. It’s a wave of the future that can’t be stopped, not only because it is so convenient and efficient, but because the rise of Internet shopping and banking makes such technology essential. The identify-card program the Indian government has instituted is enabling mobile banking for tens of millions of people who previously never had a bank account. Q: How do you see Turkey today?  (Christine in Singapore, via Twitter) A:  Turkey is facing many challenges not only because of a recent constitutional change, but because of the ongoing Kurdish conflict and the ongoing war in Syria. Nevertheless, the country is still a very important economy with a vibrant capital market that I think international investors... Investment Adventures in Emerging Markets - Notes from Mark Mobius Mark Mobius, Ph.D., executive chairman of Templeton Emerging Markets Group, joined Templeton in 1987. Currently, he directs the Templeton research team based in 15 global emerging markets offices and manages emerging markets portfolios. As he spans the globe in search of investment opportunities, his “Investment Adventures in Emerging Markets” blog gives readers a taste for what he does, when, where, why and how. Dr. Mobius has written several books, including “Trading with China,” “The Investor’s Guide to Emerging Markets,” “Mobius on Emerging Markets,” “Passport to Profits,” “Equities—An Introduction to the Core Concepts,” “Mutual Funds—An Introduction to the Core Concepts,” ”The Little Book of Emerging Markets,” and “Mark Mobius: An Illustrated Biography."

01 июня, 17:04

Busting the Frontier-Market Myths

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Although frontier markets are a small subset of the emerging market universe, we think they represent an important constituency that offer some compelling potential opportunities. Here, I’ve invited my colleague Carlos Hardenberg, senior vice president and director of frontier markets strategies at Templeton Emerging Markets Group, to outline some of the opportunities he sees in these dynamic markets and debunk some of the urban myths. Carlos Hardenberg Senior Vice President and Managing Director Templeton Emerging Markets Group There are a number of urban myths about frontier markets (the less-developed subset of the emerging-market universe). We think these myths may have caused investors to overlook them in favour of developed or traditional emerging-market alternatives. We believe conditions are now ripe for a re-evaluation of this important niche. There are some very compelling reasons why many investors might want to take another look at frontier markets today. These can be summed up as the following, which I will delve into further. Expectations for robust economic growth Continued macro development Deep discounts in valuations Low correlations Busting the Urban Myths But first, let’s address those urban myths about frontier markets. The most persistent are perceived illiquidity, small market capitalisation and poorer corporate governance standards. Each of those accusations might be true if one looks just at a narrow selection of markets, but looking at the global opportunity of the frontier space, as we do, provides a better context in our view. While index providers differ in what each regards as a frontier market, we don’t adhere to those definitions or constraints. This gives us more flexibility to explore opportunities beyond a particular benchmark, and avoid some of those limitations. We view frontier markets more broadly as young or new markets in an earlier stage of economic development than larger emerging markets, generally with higher growth rates, less research coverage and a lesser degree of foreign investment. According to our analysis, the daily turnover traded on stock exchanges in frontier markets is US$2.1 billion every day. So it’s more liquid than many people think. Equally, we estimate the total market cap of frontier companies is $1.7 trillion. Because new companies are constantly coming to market, we’d expect that figure to continue to increase. Active Management as a Force for Good Governance When it comes to concerns about corporate governance in frontier markets, we’d champion what we consider the positive influence of active management. Looking back at the development of emerging markets in general over recent decades, the relationship between ownership and management has been an important one. We believe most of the positive change came because of the close collaboration between shareholders and the businesses, and the constant feedback both ways. This is not something that can typically be achieved through a passive investing approach. If you have a computer program directing investment decisions or an algorithm determining the weighting of shares, it raises the question of who is going to interact with management and who is going to vote at shareholder meetings on matters of corporate governance. We think that is particularly important when one is considering frontier markets. Let’s turn now to the reasons that we think frontier markets pose an interesting potential opportunity for investors today. Economic Growth It shouldn’t come as a surprise to many investors that the 10 fastest-growing economies in the world today fall under the emerging markets banner. But what they might not have expected is that once one strips out China and India, the remaining eight fastest-growers are actually frontier markets. There are economic and demographic reasons why we see that trend of fast growth likely to continue. These include a low median population age, increasing urbanisation in frontier markets compared with emerging and developed counterparts, and low but growing per-capita income. Continued Macro Development Our optimism about the opportunities frontier markets present is underpinned by the evidence we have seen of a real reform agenda across many of them—in marked contrast to the developed world. In the developed world, notably in the United States and Europe, we are seeing signs of a move towards trade restrictions and isolationism that we consider backward economic developments. Meanwhile generally in frontier markets and some emerging markets, we have seen evidence of a quiet but pronounced reform effort taking place. The trajectory of commodity prices has played a part. In the so-called boom years of 2000–2008, when commodity prices were doing well, there was little impetus for reform, especially in those countries that relied on commodity exports. But when the big shock came and commodity prices corrected dramatically, a lot of these countries needed to go back to the drawing board and back to reforms to attract capital to finance development. At the end of the day, in order to attract capital, countries—especially frontier markets—need to show the world they can enact reforms. Argentina is a great example of that. After Mauricio Macri was elected president in December 2015 under the banner of a “Let’s Change” slogan, he implemented a number of reforms including lifting currency controls and settling a decade-long lawsuit that had blocked Argentina from international capital markets. As a result of those reforms, Argentina was again able to access the international capital markets. In April 2016, it launched a US$16.5 billion government bond. Egypt is now going through a similar experience. It floated its currency and subsequently secured a US$12 billion loan from the International Monetary Fund. These examples show us that reform efforts can translate into economic activity. Attractive Valuations with Limited Correlation When we talk about the attractiveness of frontier-market investing, the single most important factor for many investors tends to be valuations. Currently, frontier market equities are trading at what we consider very cheap valuations compared with both developed and emerging market peers, as the first chart below shows. At the same time, as an asset class frontier markets have traditionally had very little correlation1 with emerging markets such as China, Brazil or Indonesia, or with developed markets including the United States,... Investment Adventures in Emerging Markets - Notes from Mark Mobius Mark Mobius, Ph.D., executive chairman of Templeton Emerging Markets Group, joined Templeton in 1987. Currently, he directs the Templeton research team based in 15 global emerging markets offices and manages emerging markets portfolios. As he spans the globe in search of investment opportunities, his “Investment Adventures in Emerging Markets” blog gives readers a taste for what he does, when, where, why and how. Dr. Mobius has written several books, including “Trading with China,” “The Investor’s Guide to Emerging Markets,” “Mobius on Emerging Markets,” “Passport to Profits,” “Equities—An Introduction to the Core Concepts,” “Mutual Funds—An Introduction to the Core Concepts,” ”The Little Book of Emerging Markets,” and “Mark Mobius: An Illustrated Biography."

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25 мая, 22:18

Brazil’s Political Bumps

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Just when Brazil’s economy seemed to be turning a corner, a new political scandal has caused a strong market reaction, sending Brazil’s stock market into a tailspin. President Michel Temer, who came into office following the impeachment of former President Dilma Rouseff due to a corruption scandal, is now caught up in a corruption scandal of his own. If Temer is found not guilty, Brazil’s next general election takes place in 2018, so he would remain in office two more years and presumably continue to pursue his agenda. If he is found guilty, he would likely be impeached and removed from office, like Rouseff was. While we have been encouraged by Temer’s more reform-minded government, in our view this latest scandal doesn’t mean that momentum will necessarily end—even if he’s removed from office. If Temer were to be removed from office, we believe there will still be reforms, although they will likely take longer to implement. The bottom line is that the reform movement against corruption is ongoing, and that is overall positive for Brazil. Even if Temer himself may not be able to carry out the reforms he is now supervising, we think the reformists can move forward since they already have a momentum of their own. There is a realization that reform is needed in many areas, but it often takes time. These developments emphasize the importance of taking a long-term view when investing in emerging markets. Change doesn’t happen overnight. We think there are still plenty of opportunities on an individual-stock level in Brazil, and these types of market shocks can unlock values. We are currently seeing value in almost every sector in Brazil, simply because the market is depressed in all directions. Most interesting to us are the banking and retail sectors. In terms of monetary policy in Brazil, in my view, there is still room for Brazil’s central bank to cut interest rates further. Its currency has seen a recovery from its lows hit on May 18 when the Temer scandal broke. More importantly, there has been a steady downturn in inflation. Brazil’s annual inflation rate stood at 3.77% in mid-May, its lowest level in 10 years.1  In my view, an aggressive cut in interest rates would be very good for the economy. I think it’s about time that Brazil had a reasonable interest-rate environment, particularly for small- and medium-sized businesses which could then get financing at lower rates. This could give an overall boost to the economy. We will of course be monitoring the situation in Brazil to determine what type of impact this latest setback has on Brazil’s economy and the businesses operating there. In my view, the setback is temporary; we have seen other markets bounce back from political scandals in the past. The ongoing, longer-term recovery of Brazil’s stock market and economy still looks to us to be intact.   Mark Mobius’s comments, opinions and analyses are for informational purposes only and should not be considered individual investment advice or recommendations to invest in any security or to adopt any investment strategy. Because market and economic conditions are subject to rapid change, comments, opinions and analyses are rendered as of the date of the posting and may change without notice. The material is not intended as a complete analysis of every material fact regarding any country, region, market, industry, investment or strategy.   Important Legal Information All investments involve risks, including the possible loss of principal. Investments in foreign securities involve special risks including currency fluctuations, economic instability and political developments. Investments in emerging markets, of which frontier markets are a subset, involve heightened risks related to the same factors, in addition to those associated with these markets’ smaller size, lesser liquidity and lack of established legal, political, business and social frameworks to support securities markets. Because these frameworks are typically even less developed in frontier markets, as well as various factors including the increased potential for extreme price volatility, illiquidity, trade barriers and exchange controls, the risks associated with emerging markets are magnified in frontier markets. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. _____________________________________ 1. Sources: Reuters, IBGE. Investment Adventures in Emerging Markets - Notes from Mark Mobius Mark Mobius, Ph.D., executive chairman of Templeton Emerging Markets Group, joined Templeton in 1987. Currently, he directs the Templeton research team based in 15 global emerging markets offices and manages emerging markets portfolios. As he spans the globe in search of investment opportunities, his “Investment Adventures in Emerging Markets” blog gives readers a taste for what he does, when, where, why and how. Dr. Mobius has written several books, including “Trading with China,” “The Investor’s Guide to Emerging Markets,” “Mobius on Emerging Markets,” “Passport to Profits,” “Equities—An Introduction to the Core Concepts,” “Mutual Funds—An Introduction to the Core Concepts,” ”The Little Book of Emerging Markets,” and “Mark Mobius: An Illustrated Biography."