Emerging market stocks are poised to do well according to Franklin Templeton’s emerging markets specialist Mark Mobius. Speaking with CNBC he pointed to two clear reasons.First, he said the selloff in Treasuries will send more money into equities and at least a third of that into emerging market stocks.
Since emerging markets now account for about 30 per cent of global market capitalisation Mobius said we should expect a corresponding flow into EM stocks.
“People are now beginning to realise that they cannot be sitting on bonds that are paying one, two or even three per cent, when inflation is running higher than that. …If you look at equities of course, the yields are much, much greater than the bonds.”
Second, he said emerging markets will benefit from quantitative easing. Mobius said markets can expect to see money supply increase since Fed chairman Ben Bernanke promised to increase liquidity until he saw sustained growth.
Mobius also said he was bullish on Africa because it would gain from investments from countries like Brazil, India and China. Mobius told CNBC that oil prices have not kept pace with inflation and that “there’s some catch up to do.” He said he was bullish on Russia because of the rise in oil prices.