China 'may be ideal place to invest your cash'

Dr Mark Mobius, executive chairman of Templeton Emerging Markets Group, expects some recovery in the emerging markets in the next 12 to 18 months, noting that bear markets are relatively short in duration, lasting 14 months on average, "and go up muc
Dr Mark Mobius, executive chairman of Templeton Emerging Markets Group, expects some recovery in the emerging markets in the next 12 to 18 months, noting that bear markets are relatively short in duration, lasting 14 months on average, "and go up much higher than they go down in percentage terms".ST PHOTO: KUA CHEE SIONG

If some investors are fleeing and others are too scared to enter, you may just have found an ideal place to invest your cash.

That is the advice from well- known stock picker Mark Mobius, who told The Straits Times yesterday that China is one such market, despite the volatility that has dragged it down in recent weeks.

China's benchmark Shanghai Composite Index fell 0.8 per cent to 3,205.99 yesterday, after a two- day rally that pushed the index up more than 10 per cent. That had given investors some cheer after the index plunged 15 per cent over Monday and Tuesday last week.

Dr Mobius, executive chairman of Templeton Emerging Markets Group, said: "You've got a situation in China where the government obviously wants to see the market go up, but the fact that it got involved frightened a number of people because it increased the uncertainty."

He noted that the A-share market is driven by investors who are very speculative and they often look for signals by China's government. When that market was at new highs, "the government was saying, 'we like this, we want this to happen,' and that gave a lead to the market".

"When it started coming down, people expected the government to come rescue them, but it didn't work as the confidence had been broken," said Dr Mobius, adding that it means the Asian markets will take some time to recover.

He remains unfazed by the volatility in most markets in recent weeks as they have been on a downtrend for a while now, in United States dollar terms.

"China's so-called (yuan) devaluation of 6 per cent is nothing, compared with what you've seen in other parts of the world like Malaysia or Thailand - 20 per cent to 30 per cent is usual in such currencies."

That could even bode well for certain stocks, such as stocks of an exporter, "because that company will do better with a weak currency".

"But overall, if you're in a market and suddenly there's a devaluation, and if the stocks don't correct for that, you have a loss - so we have to pay attention."

Dr Mobius, 79, does not expect investors to hold off from buying stocks now, but urges them to be cautious in times of volatility.

"It's a good idea to have cash available so that you can go in when prices are right," he said.

"We're still invested in emerging markets and have a little more cash than we normally would have because we're waiting for those opportunities. But I wouldn't say stay out of them completely, because prices have come down a lot, so there are many opportunities."

Dr Mobius said it is interesting to see how commodities are now out of favour and, to some extent, that there is concern about the financial sector, so he finds "it's not a bad idea to start looking at those sectors that are unpopular".

He expects some recovery in the emerging markets in the next 12 to 18 months, noting that bear markets are relatively short in duration, lasting 14 months on average, "and go up much higher than they go down in percentage terms".

Although uncertainty in the markets drives people out of it, Dr Mobius reminds investors of the opportunities out there in such times and that they can start looking. "It's very difficult but you really have to go against the grain sometimes."

A version of this article appeared in the print edition of The Straits Times on September 01, 2015, with the headline 'China 'may be ideal place to invest your cash''. Print Edition | Subscribe