Long-time emerging market bull Mark Mobius says food inflation could be a problem in India and China, though he still likes the long term outlook.
How he’s investing this year is by picking emerging markets that are relatively sheltered from food inflation. Like Ukraine:
While we select stocks using a bottom-up investment approach, in general the commodities space continues to be attractive to us. Food prices have gone up and are likely to stay up for some time. To some extent, bad weather has been a cause for the rise in prices, but from a longer-term perspective, increasing demand for food, particularly from India and China, means we may have to live with higher food prices unless farm productivity increases dramatically. This is one of the reasons we are looking very closely at investments in Ukraine, a country that is famous for agriculture and its fertile “black earth”. Operations there are not limited to wheat, corn and other crops but also extend to dairy and meat production. Meanwhile in Brazil, we are looking at food processing businesses.
In fact, Eastern Europe could be full of opportunities:
Stocks run ahead of reality on the ground and that certainly is what happened in Eastern Europe. However, we are still looking very closely at the region; we are finding opportunities in Russia, but we are not ignoring other markets like Poland, Hungary, and the Czech Republic. As you may know, we also recently began a large operation in Romania. It is still early, but I think there will be a time when the stock prices of companies in those countries are going to look attractive despite the possible debt problems of their governments. We are not counting Eastern Europe out completely because we believe there could be an opportunity to go in and invest for the long-term.
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