MARK Mobius, executive chairman of Templeton Emerging Markets Group, remains optimistic on the investment outlook for Thailand and other emerging markets, despite a number of benchmark stock indices in the region sitting at record highs.
Still, he cautioned that investors should be mindful of the risks of a correction in the stock markets.
Mobius, long known as an investment guru on emerging markets, said yesterday investors should be wary of internet stocks, which could be hard hit amid a trend for rising interest rates.
Mobius said the main stock indices in emerging markets had room to grow a further 20-30 per cent, despite the frothy levels in many of these markets.
“There would be a correction along the way,” he told a group of Thai journalists in a special interview.
Asked could the correction happen this year, he replied that no one could predict its arrival.
However, usually the markets would fall sharply after the “euphoria when everybody puts their money into the markets”.
“The bull market historically lasts longer than a bear market,” said Mobius, noting that the later usually last about 1-1.5 years.
Emerging markets outperformed developed markets last year in dollar term returns.
Mobius was optimistic on the prospects for the Thai stock market and was encouraged by the relative stability in the county’s politics.
He said that an election planned for this year would not change the political environment much as the government would manage the poll carefully as it does not want turmoil to break out. Investment would play a key role in driving the economy, he said.
He said Thailand had under-invested in infrastructure for many years and he welcomed the government’s proposed investment in many infrastructure projects, including for high-speed train services.
Asked why private investment has not increased much, he said it may be because of bureaucracy. If the government made investment rules more simple, it would lead to a surge in investment.
The government should streamline taxation rules, Mobius said during an interview with Suthichai Yoon, co-founder of The Nation, when the investment guru had been speaking on the topic of “Insights on the Emerging Frontier” at Emerging Market Outlook 2018, hosted by KBank Private Banking.
He said that the Thai economy has a potential growth rate of 6-7 per cent.
The Templeton Emerging Markets Fund has invested about 2-3 per cent of its portfolio in Thai equities.
He said he liked the Thai banking sector because it could quickly adapt to the new businesses environment. His next picks are consumer products and tourism. Thailand also has rich agricultural resources. With Thais renowned for their politeness, this trait has been an outstanding draw for foreign tourists.
The major investment concern is how China will manage its slower-growth economy, as what happens in China will affect Southeast Asia.
Rises in interest rates in a number of countries may o affect internet companies, such as Uber and Tesla, which are still burning money and not yet earning income.
If exchange traded funds were to pull money out from these companies, the stock markets would go down, Mobius said. Fund managers that track the main indices have put lots of money into technology stocks, Mobius said.
However, internet companies such as Alibaba, Tencent are making money and would continue to do well. His advice for investors is to be optimistic and do research about the business and the people who are behind it. Investors are advised to diversify their investments and have knowledge about widening industries, Mobius said.
Meanwhile, Supachai Panitchpakdi, former secretary general of the UN Conference on Trade and Development, also warned about a global stock market correction. “A financial crisis happens one every 10 years,” he said in reference to the 2008 global financial crisis. People should be aware of what could happen in Europe, where many economies are surviving because they have borrowed lots of money from the International Monetary Fund and the European Central Bank, he said in a keynote speech at the same KBank Private Banking forum yesterday.
He said many central banks had injection lots of money into economies, leading to rising stock prices worldwide, but in the absence of real economic reforms.