Istanbul: Mark Mobius has said stocks in Brazil, Russia, India and China are likely to rise by 30-40% in three-four years as higher economic growth and lower government debt spurs corporate earnings.
Mobius, chairman of Templeton Asset Management Ltd, said he’s increasing holdings in all emerging markets, with particular focus on the four biggest developing nation economies collectively known as the Brics.
“Bric countries are really at the top of our favourite holdings,” Mobius said in an interview on the sidelines of a press conference in the Turkish capital on Wednesday. “You can see Bric countries have been best performing.”
Russia’s RTS Index has surged 138%, the biggest gainer among 89 equity gauges worldwide, and Brazil, China and India rallied more than 75% as the global economic recovery spurred demand for commodity exports. While developed countries may shrink 4% this year, emerging markets as a whole may avoid a contraction with zero change in gross domestic product, Mobius said.
While a sudden violent correction is likely in a bull market, investors should be ready to buy, he told reporters. The biggest growth areas in emerging markets are in the consumer and commodity industries, with China and Brazil offering among the cheapest stocks worldwide.
Developing nation equities have more than doubled from their low in March and gained three times more this year than the Standard and Poor’s (S&P) 500 Index of US stocks, up 74%.
The MSCI Emerging Markets Index of 22 developing countries added 0.6% to 986.58 on Wednesday, poised for the highest closing level since 11 August 2008. The index is valued at 20 times reported earnings, according to data compiled by Bloomberg.
The MSCI China Index trades at 17.7 times profit, while the MSCI Brazil Index is valued at 18.6 times earnings. That compares with a price-earnings multiple of 30 for the MSCI All Country gauge of developed and emerging economies.
The S&P 500 is valued at 22 times profit of the companies in the index.
Templeton has about $2 billion invested in the four called Bric economies, Mobius said. He was attending at a conference in Istanbul where Templeton and Akbank TAS, the Turkish bank part-owned by Citigroup Inc., said they are offering a fund covering Bric nations to Turkish investors.