Even inflationary times offer investment opportunities

Experienced investors could see investment opportunities during high inflation periods.

Many people, including successful investors, are now worried about inflationary pressure as skyrocketing oil and food prices have pushed costs up for both producers and consumers.

"Our big risk is inflation," Mobius said in response to a question posed by a local fund manager at Friday's dinner hosted by US-based Franklin

Templeton Group, on how inflation impacted emerging markets.

Central banks would raise policy rates to check inflation, which will lead to rate hikes by commercial banks. Then it will hit everybody - business, industry and stock markets.

However, investment opportunities could arise during bad times.

He recalled his experience in Brazil and Argentina in 1989-90 when inflation spiked 3,000 per cent. In those days, he could pick up good stocks at cheap prices as people unloaded them.

In short, "stocks and Templeton Asset Management", he answered with a smile to a question posed by The Nation on his how-to-beat-inflation investment strategy.

Dennis Lim, Mobius's right-hand man, suggested investors should buy assets whose value grows with high inflation. For example stocks paying high dividends or real estate. Lim, also CEO and senior managing director of Templeton Asset Management

 Ltd, said inflation of 6-8 per cent is not a problem but it would be a problem when it goes up to 12-15 per cent.

Mobius and Dennis are very bullish on emerging markets where economic growth is much faster than in developed economies.

Mobius said the "three C's" - commodities, consumer and corporate governance - are his key investment programme.

Commodities include oil, gas, copper and ore, while he bets on consumers because there are billions of them in China and India and they are getting richer and richer.

Corporate governance means that he invests in companies that give shareholders fair treatment.

Mobius has faith in long-term investment.

"The world belongs to optimists, bull markets last longer than bears," he said.

He had some advice for investors who enter the market at its peak and then get hurt by the following fall. "To get your money back, put more of your money in [buying stocks during the market crash as other investors dump stocks]."

Lim suggested that investors who recently lost money from stock markets in China should not worry and look for longer-term market potential. His investment in Brazil is promising due to the high price of ore that generates high income for Brazil.

The two men foresee more investment opportunities in Thailand.

Mobius said his investment portfolio in Thailand has reached US$2 billion (Bt64 billion).

He said he would open his research office here in the second half of this year.

"The political environment is getting better and better, the economy is on the right track," he said.

In the past few days, Mobius and his team visited Siam Cement, Kasikornbank and Precious Shipping, which are listed on the local bourse.

"To invest, you have to investigate; to know their management, their motivation. Why they do this and why they do that," he said of his secret in finding good companies and good stocks.

Mobius said when he joined Templeton in 1987 as president of the Templeton Emerging Market Fund, a closed-end fund and the first emerging market equity fund available to US investors, he started with only $100 million under management.

Now Templeton Asset Management, a subsidiary of Franklin Templeton Group, a global investment management firm, has $42 billion under management.