Europe's debt crisis won't push the global economy into a recession because liquidity provided by central banks is fueling underlying demand, said Franklin Templeton Investments' Mark Mobius.
“We just don't see any cause for alarm in the sense of things completely drying up and there being a situation where nobody buys anything,” said Mobius, who oversees more than $40 billion in assets as executive chairman of Templeton Emerging Markets Group. “We don't see a let-up in demand. Governments around the world continue to pump money into the system and interest rates are low.”
Stocks and the euro declined yesterday as Italy's borrowing costs increased to a euro-era record at an auction, deepening concern that Europe will struggle to contain its debt crisis. Mobius said Europe won't “drag everyone down” into a recession and that the outlook is for a world economy “puttering along” at a slow pace of growth.
“We have not been very, very concerned about the situation in Europe,” Hong Kong-based Mobius said in a telephone interview from Taipei on Nov. 10. “The markets of course will go haywire. Volatility is with us and will increase as we go forward, both up and down.”
With the average price-to-earnings ratios of stocks in emerging markets at “near their all-time lows,” Mobius said he's finding “great opportunities” to buy stocks, especially in Brazil, Russia and Turkey. In Thailand he said he's “lying in wait” to buy if valuations fall.
Some banks in Brazil, Russia and Turkey that aren't exposed to the Europe debt crisis are “looking pretty good,” especially those that are strengthening their consumer businesses, he said.
Regulation in Zimbabwe
Mobius is also looking at banks in countries including Kenya and Zimbabwe, where regulation is “improving dramatically,” he said.
The MSCI Emerging Markets Index had its biggest two-day gain in two weeks yesterday, on speculation China is relaxing lending curbs and new governments in Greece and Italy will help contain Europe's debt crisis.
Mobius is “very, very low” on China property stocks and expects house prices in the nation to drop 15 to 30 percent within two years, he said.
“It's not going to be a huge crash because the demand for housing in China is still incredible,” said Mobius. “But the prices are too high. When the prices come down I think you will see some stability.”
China's Premier Wen Jiabao said last month the government will “firmly” maintain its control over the property market even as it seeks to “fine tune” other economic policies.
Bullish on Commodities
Mobius said the long-term upward trend for commodities, including copper, palladium, nickel and platinum, remains intact.
“The trend is definitely up because there's worldwide demand for whatever it is,” he said. “It's there because of China, India, Brazil. All these big countries that are producing more and more consumer goods are going to need more and more.”
Chinese President Hu Jintao pledged to boost imports as the world's second-biggest economy heads for what International Monetary Fund Deputy Managing Director Zhu Min said this month would be a successful downshift from inflationary growth.