Mobius, Leung: Pay More Attention to Emerging Markets

Monday, 10 Oct 2011 12:00 AM

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Retail investors should pay more attention to emerging markets than they did in the past, when their exposure was probably limited to part of an equity fund, say experts like Mark Mobius and Ivan Leung.

U.S. and European financial and economic woes should prompt wise investors to look at emerging-market bonds and currencies, especially.

"What's happened is now not only an interest-rate play but a currency play," Mark Mobius, executive chairman of Templeton Emerging Markets Group, tells CNBC.
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"You've seen these currencies in emerging markets strengthen over the last five years."

Mobius200.jpg
Mark Mobius
(Templeton file photo)
Others agree that sound economic fundamentals will make emerging-market bond and currencies more attractive, especially while U.S. and European currencies continue sliding.

"Eventually emerging-market currencies and the [Chinese] renminbi [or yuan] will be coming to the forefront," says Ivan Leung, chief investment strategist for Asia at J.P. Morgan Private Bank, CNBC adds.

"And local, emerging fixed-income markets offer real yields. Sovereign credit ratings and fiscal fundamentals are trending upwards."

Still, in times of uncertainty, investors often abandon higher-yield assets and run to what they deem dull but safe, often U.S. Treasurys.

Stocks and bonds in emerging markets — those in countries that growing in the footsteps of industrialized ones — have been falling as part of the global selloff as foreign investors bolt to safety.

That poses a problem, others warn, as when investors bolt emerging economies they often send markets on wild rides in their wake.

"All the ingredients are in place for a similar crisis to occur. The question is what magnitude," says Benoit Anne, head global emerging markets strategy at Societe Generale, according to Reuters.

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