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Mobius sees emerging-market rally on strengthening US growth

The MSCI Emerging Markets Index has risen 2.6 per cent from its four-month low on November 14

Gulf News

Singapore: The rebound in emerging markets is expected to be “sustained” as a strengthening US economy under President-elect Donald Trump may help boost these economies, according to Mark Mobius, executive chairman at Templeton Emerging Markets Group.

The MSCI Emerging Markets Index has risen 2.6 per cent from its four-month low on November 14, while some currencies in developing countries — including the South African rand and South Korean won — have rebounded in the past week. All 24 emerging-market currencies dropped against the greenback in the two weeks following the November 8 US elections.

“He will probably be successful to resuscitate the American economy,” Mobius said in a Bloomberg Television interview in Singapore on Tuesday. “That’s good for everybody including emerging markets. His programme in my view would be heavy infrastructure spending. Spend like crazy, build up a huge deficit that would be concerning to the rating agencies, which will help push the dollar down.”

Trump has talked up his infrastructure investment plans, promising to spend as much as $1 trillion on roads, bridges and airports over the next decade. In his victory speech, the real estate mogul said he wants to make America’s infrastructure “second to none.”

Investors should be in China, India, Brazil and Russia, and allocate at least 30 per cent of their portfolios in emerging markets, Mobius said. In Southeast Asia, he sees bright spots in Indonesia, Thailand, as well as Vietnam, as they move toward a more market-based economy in the way they allocate their resources. Indonesia, for instance, has been bringing in private investment to develop its infrastructure, he said.

“I don’t see a sell-off for emerging markets,” he said. “We’ve already seen that. We’ll probably see a gradual recovery.”