Wednesday, October 13, 2010

Mobius Positive On Malaysia But Says Stocks Are Not Cheap

On Business Times:

  • Mobius positive on Malaysia's growth

    By Adeline Paul RajPublished: 2010/10/13

    EMERGING markets (EMs) investment guru Mark Mobius is positive on the Malaysian market, but says its stocks are not as cheap and dividend yields not as high as in other EMs.

    For that reason, Malaysia, with its average price-earnings ratio of 15 times, is not among his top picks of EMs.

    He prefers Brazil, Russia, India, China, Thailand and Turkey. And, among "frontier" EMs, he likes Vietnam, Ukraine, Qatar, Dubai and Kazakhstan best.

    "The key is value. We're looking for bargains. We continue to invest in Malaysia, but valuations tend to be a little higher here so it's more difficult for us to find the bargains," Mobius, the executive chairman of fund management firm Templeton Emerging Markets Group (TEMG), said at a media briefing in Kuala Lumpur yesterday.

    TEMG currently has assets under management of US$48 billion (RM149 billion), of which about 1 per cent is invested in Malaysia.

    Mobius likes commodity and consumer stocks here.

    "You can't say that Malaysia is a screaming bargain compared to other EMs, but it's definitely been doing very well," he remarked.

    The stock market's key benchmark index has gained about 17 per cent so far this year, trailing Indonesia's 40 per cent and Thailand's 33 per cent growth.

    The FBM KLCI has risen to new highs of late, helped by a strong inflow of foreign funds. On Monday, it rose to a fresh 33-month high of 1,487.41, but eased slightly to 1,486.57 yesterday.

    Mobius said the current bull run in EMs, including Malaysia, can be sustained, but cautioned that there could be "sizeable" corrections along the way, possibly to the tune of 15-20 per cent.

    "You've got to be ready for corrections. These corrections can be quite sizeable and they will look like bear markets, but they won't be bear markets.

    "With derivatives being so big these days and the leveraging that you have in these markets, and with hedge funds playing these markets, they can create an incredible decrease in prices at very short notice," he said.

    Investors should not panic easily during corrections, he said, pointing out that bull markets tend to last longer than bear markets.

    Mobius expects Malaysia to have good growth this year and the next.

    On the ringgit, he said it was undervalued by about 8 per cent, but it was "coming back up".

    The ringgit closed 3.108 against the US dollar yesterday.

Past postings on Mark Mobius:

  1. 18 April 2008: Some Rather Bullish Comments On the Malaysian Markets
  2. 19 Jan 2009: Templeton's Mark Mobius Is Bullish On Emerging Markets
  3. 4 May 2009: Mobius Says Emerging Markets Base Building For Next Bull Market!
  4. 8 July 2009: Market Outlook For Emerging Markets