Dr Mark Mobius has tipped emerging markets to undergo strong growth in 2015 that will be “comfortably in excess” of that exhibited by developed markets.
Mobius, fund manager of Franklin Templeton Investments’ emerging markets trust, highlighted economic reforms being implemented across the EM spectrum as a key potential driver behind growth and corporate profitability.
“Even with major economies like Brazil and Russia slowing down, overall growth in emerging markets during 2015 is expected to be comfortably in excess of that achieved by developed markets, with China and India likely to drive the Asian region to particularly strong growth.
“Many emerging markets, among them China, India, Indonesia, Mexico and South Korea, have announced or embarked upon significant reform measures that differ in details but are generally aimed at sweeping away bureaucratic barriers to economic growth, encouraging entrepreneurship and exposing inefficient industries to market discipline.
“Most are also looking to rebalance economic activity away from export- and investment-heavy models to become more oriented toward consumer demand.”
There is an undercurrent of opinion in financial circles that emerging market nations’ increasing adoption of technological advancement could be a significant component in accelerating growth.
It is a view that is shared by Mobius, who believes that frontier markets also stand to benefit.
He said: “We are enthusiastic about the potential of new technology to accelerate growth trends, with some Internet and mobile communications-based technologies in particular offering less developed countries the opportunity to leapfrog generations of economic change in more mature markets and move directly to efficient modern systems.
“This factor could be a particularly dynamic driver of development in frontier markets that include much of Africa, which could give additional impetus to markets that already benefit from highly favourable demographics, abundant natural resources and low starting points in terms of existing per capita gross domestic product.”
Mobius acknowledged the detrimental effects of the ongoing turmoil in the Russian economy – the result of UN trade sanctions imposed following Russia’s invasion of Ukraine – and the more recent decline of the Brazilian market, but says the economies have sufficient means to recover from their respective setbacks.
“We do not disregard issues such as the recent weak economic performances in Brazil and Russia as well as the market-unfriendly direction of policy in those countries,” he said.
“However, we believe both Russia and Brazil have the resources to bounce back strongly should more appropriate policies be adopted.
“With Russia in particular, much risk already has been discounted in exceptionally low equity valuations as of December-end, though the Russian government’s unwillingness to soften its stance toward Ukraine could elicit more sanctions that result in a negative environment for investors.”
