Mobius punts Argentina, Kazakhstan

2012-01-06 09:39

Santiago - Templeton mutual fund’s emerging markets investment boss will focus on frontier markets like Argentina and Kazakhstan in 2012, particularly in the banking, oil and gas sectors, he said on Thursday.

Mark Mobius, who oversees about $50bn in investments as executive chairperson of the Templeton Emerging Markets Group, thinks fears about Europe’s financial crisis are overblown and expects demand for commodities like Chile's top export copper to remain strong this year, particularly from top consumer China.

His top frontier market and sector picks for this year?

“Argentina would be right up there. Argentina number one. Nigeria, Vietnam, Kazakhstan and Kenya,” he told Reuters on the sidelines of a business forum during a visit to the Chilean capital of Santiago.

“In Argentina it would be banks and oil and gas. In Nigeria it would be banks, in Vietnam it would be consumer products. In Kazakhstan it would be oil and gas. And in Kenya it would be telecoms,” he said, cautioning that he expects trade in frontier markets to be more volatile this year.

Major emerging markets like Bric members Brazil, Russia, China and India are also increasingly investing in frontier markets, he stressed.

China’s economy may be on track to slow for a fourth successive quarter, easing further from the first quarter’s 9.7% annual growth rate. Economists expect the final three months of the year to have slipped below 9%.

But even growing at a more moderate pace this year, China will still help underpin demand for commodities, Mobius said.

“China will be growing at 7% to 8%, so I don’t see that being a problem. I think China will continue to grow, and therefore demand for commodities will continue. Also, it’s not only China that demands these, it’s also other countries.”

Another factor that will keep commodity prices buoyant is that currencies lose value over time, meaning commodity prices in dollar terms will continue to rise.

Mobius keeps about 60% of investments in equities and the other 40% in debt, a split that helps spread risk and which he expects to keep constant for now.

But while optimistic about the world economy - he expects Europe’s crisis to peter out in the course of this year - he sees red flags for the global economy.

“Money supply is a big problem, because there’ll be a concern as inflation comes back that there’s going be an effort by governments to withdraw money, and that could create some volatility,” he said.

“The other is derivatives. There hasn’t been a separation of trading in derivatives in the banking system, separating regular banking from investment banking, and that could be a risk,” he said.

Templeton is a unit of Franklin Resources.