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Mark Mobius: Emerging markets Q & A

By Prieur du Plessis on 09/15/2010 – 2:42 am PDTLeave a Comment

The paragraphs below come courtesy of Mark Mobius, emerging markets guru and executive chairman of Templeton Asset Management.

At what stage of the economic cycle do you think the global market is at now? Why?
On a global basis, we are still at an early recovery stage. However, it is important to look at each country individually since not all economies are at the same phase. While some developed markets are still lagging, many emerging markets have recovered. In fact, there was no recession in some parts of the world so it is important to look at each individual country. For example, in Brazil, economic growth has continued at a high pace while standards of living also increased. This was also true for China.

Why do you think the global economy will not suffer a “double-dip”?
We believe a double-dip scenario is not likely right now because of the sustained growth in money supply. The U.S. government is already poised to embark on “Quantitative Easing 2” at the first signs of a faltering economy.

Taking a 10-year view, do you expect to see a period of high inflation as a result of the enormous money supply in the global economy?
Much will depend on the will of governments around the world to withdraw liquidity when inflation kicks in. Historically, governments have a tendency to act slowly so we should expect a period of rising inflation in the next 10 years from the current low base.

How do you see the next 20-30 years changing the Top 10 list of richest countries in the world?
We can certainly expect to see more of today’s emerging markets in that list. Many of the fast growing countries in emerging markets such as China and India could continue to power ahead and become very rich. As such, we will continue to position our funds to include the best investment opportunities across all emerging markets.

Are markets “decoupling”?
All countries today are inextricably intertwined through trade and communication in one form or other. Therefore, it is not realistic to say that one country or one group of countries is decoupled from another. However, that does not mean that they must move in the same direction at the same time or pace.

Will emerging markets continue to exhibit high volatility?
All markets, including emerging markets, will continue to exhibit high volatility. With short selling, naked short selling, growing derivatives and the expansion of markets globally, volatility will be with us for some time to come. Derivatives, for example, are now valued at over US$600 trillion, more than 10 times the total global GDP.

Some analysts say that gold is the only safe heaven when there is a huge uncertainty in the market. Do you agree? Why?
Historically, gold has not been a good store of value

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Tags: list of richest countries, , , richest countries in the world, templeton asset management,

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