Mobius Sees Resilience in Emerging Markets as Faber Predicts U.S. Rebound

Templeton Asset Management’s Mark Mobius said emerging economies are in “better shape” than developed nations amid turmoil roiling global markets. Marc Faber, publisher of the Gloom, Boom & Doom report, expects the U.S. Standard & Poor’s 500 Index to rally about 40-to-50 points. 

The S&P 500 Index (SPX) slumped 60.27 points, or 4.8 percent yesterday, the biggest percentage drop since February 2009, as concern the global economy is weakening prompted a global rout. The MSCI World (MXWO) Index of global stocks entered a so-called correction yesterday, falling more than 10 percent from this year’s high, amid a seven-day sell-off that wiped out more than $4.4 trillion from market values worldwide. 

“We’re looking at equities all the time and equities are looking better and better with all this turmoil,” Mobius, who oversees about $50 billion as executive chairman of Templeton's emerging markets group, said in a Bloomberg Television interview today. “The emerging markets are in much better shape than the developed countries. If you look at the gross domestic product levels, foreign exchange reserves, emerging markets are in a very, very sweet spot.” 

Developing economies may grow 6.6 percent this year, compared with “advanced” nations’ 2.2 percent, according to estimates from the International Monetary Fund in June. Indonesia’s GDP expanded 6.49 percent in the three months to June from a year earlier, the statistics bureau reported today, the third straight quarter that growth has exceeded 6 percent.

‘Extremely Oversold’

The MSCI Emerging Markets Index dropped 3.1 percent as of 2:02 p.m. in Hong Kong, taking its four-day slump to 9.4 percent. While the gauge is set for its biggest four-day decline since November 2008, its decrease today is less than the MSCI Asia Pacific Index’s 4 percent slump, the most since March 15. 

Markets are “extremely oversold,” Faber, 65, said in a separate Bloomberg Television interview. He expects a “snap- back” rally in the S&P 500 though doesn’t expect new highs for equities in 2011. 

Chief strategists at 13 banks from Barclays Plc to UBS AG see the S&P 500 surging 17 percent through Dec. 31, the average estimate in a Bloomberg survey. Their projection that the index will reach 1,401 hasn’t budged in four weeks, while mounting concern U.S. growth is slowing drove the S&P 500 down 11 percent since July 22, including yesterday’s tumble. 

The U.S. gauge closed yesterday at 1,200.07, the lowest level since Nov. 30. Futures on the gauge dropped 0.1 percent to 1,197.30 today. About $1.8 trillion has been erased from American equities as reports on manufacturing and consumer spending showed the world’s largest economy is slowing. 

Federal Reserve

“I don’t see a double-dip situation in the U.S. simply because of the amount of liquidity in the system that could go in with further easing by the central bank,” Mobius, 74, said by phone from Tokyo.

U.S. Federal Reserve policymakers meet for one day on Aug. 9. At their last meeting in June, Fed officials decided to keep the central bank’s balance sheet at a record to spur the slowing economy after completing $600 billion of bond purchases. 

Mobius joined Templeton in 1987 to help oversee emerging market investments, according to a biography posted on the fund company’s website. His Templeton Emerging Markets Fund gained 9.6 percent in the year to yesterday, compared with the MSCI Emerging Markets Index’s 6.1 percent increase. 

Thailand, Vietnam and Indonesia are of “particular interest” to Templeton, Mobius said. Source: Bloomberg