Mark Mobius has been an emerging market investor for as long as there have been emerging markets, and here he gives his views as Templeton's supreme asset allocator on how he thinks Asia will do in 2004.
What do you think are going to be the main trends for 2004 in the Asian markets?
Mobius: I see three main trends. Firstly consumerism and consumer products are going to be the investment theme going forward. Secondly, commodities will also be a focus, given the increased demands of Asian industries. Thirdly, we'll see countries in Asia converging more and more as they increase trade with each other. We see this between Taiwan and China, China and Hong Kong and Korea and China.
Do you think China can sustain its current growth rates?
China's growth has to eventually slow down in percentage terms. This doesn't mean the economy stops growing, but the bigger the economy gets the harder it is to produce those kinds of growth rates. But rapid growth can continue, particularly when you see the way the Chinese have been changing the rules and regulations to favour more investment.
Do you participate in China's A-share market? Is this as an interesting opportunity?
Currently, we do not participate in the A-share market. But we are applying for an allocation. We think the market is interesting, but a bit expensive so at the moment we may be better off investing in H shares. But, the attraction of the A-share market is that it is very broad and you get a lot of exposure.
Are you as enthusiastic about India?
I am hesitant about India. It's already moved up quite a lot and the valuations are beginning to look expensive. However, if the government moves forward on its privatization this would be a positive. It would provide money for the government to balance its budget. It would also provide liquidity in the market, at hopefully reasonable prices. This scenario could be quite interesting.
Investors seem to have mixed sentiments about Korea. What do you think are the prospects for 2004?
I think we might be in for a big ride in the case of Korea. They have had a lot of problems with the chaebols. I'm waiting for them to go after Samsung. That will have an interesting impact on the market, particularly because a lot of foreigners are not aware of this as a potential problem. Despite that, some of the stocks have gone up a lot, and some valuations are still attractive. I certainly would not be a seller.
Do you think the Thai market is now overvalued?
No, not really. Some of these stocks look very attractive. We sold some Thai stocks in the past, thinking they looked expensive. However, suddenly they have started looking cheap again. The problem is that we are sitting on stocks and can't see ahead. They look expensive, but then suddenly there is an improved earnings announcement, and the value looks better. I wouldn't write off Thailand by any means.
Do you think that the bullrun we have seen in the last six months will continue into 2004?
Usually markets do tend to overshoot what is actually happening on the ground. I don't think we would see the same kinds of increases next year, but at the same time this run may not be over. We are still way behind where we were before 1997. So, there is certainly room for this kind of performance to continue. But it is anybody's guess for how long. I wouldn't dare to put money on that. We put money on companies that are good value from a long-term point of view.
Do you think that the levels the market reached before 1997 were realistic?
No. But these things happen. It's very difficult to say that it will never happen again. Those that forget history are doomed to repeat it, and that I think is the case here.
What is your big prediction for 2004?
Happy investors and bull markets all around. We have healthier companies with stronger balance sheets as well as more awareness of corporate governance. I think this is very positive.
FinanceAsia is running a competition to predict the level of our Asian blue chip index The FinanceAsia 100 and a case of champagne will be awarded to the entrant that comes closest to predicting the level on December 17. If anyone predicts the number exactly, they will win an iPod music player. The current level of the index is 1220 and entries should be made as round numbers to [email protected]