Mark Mobius says it’s no time to start worrying about the world rally in equities and commodities and, instead, investors should jump in, according to Bloomberg.
The emerging markets bull sees global stocks and commodities going ever higher due to Federal Reserve Chairman Ben Bernanke’s latest round of quantitative easing.
But wait, there is a catch.
Central banks in emerging markets will buy dollars to prevent their currencies from rising too fast and as their foreign exchange reserves increase in size so they will appear increasingly safe to investors looking for markets with higher economic growth and yields, Mobius said.
“It’s a vicious cycle,” he said. “The consequences could be not too good going forward. It’s something we have to watch carefully.”
So the ever bullish Mobius is pointing out the same cataclysmic trigger point that pretty much everyone else sees. As countries try to avoid losing their competitive edge, they’ll need to buy more dollars in the so called currency war. But as money continues to flow in, there is the risk of an asset price bubble.
Mobius says there is the risk of “people getting hurt,” in such a bubble scenario.
So there could be an emerging markets bubble, but feel free to ride it for now.