Mark Mobius sees emerging-market currencies rebounding as Fed shifts

Mark Mobius, executive chairman of Templeton Asset Management's Emerging Markets Group.
Mark Mobius, executive chairman of Templeton Asset Management's Emerging Markets Group.PHOTO: BLOOMBERG

HONG KONG (BLOOMBERG) - Investors should seek to benefit from a potential rebound in emerging-market currencies now the US has cleared the uncertainty by raising interest rates, said Mark Mobius at Franklin Templeton Investments.

"Many currencies in emerging markets have nose-dived and they are undervalued," Mr Mobius, chairman of the emerging markets group at Franklin Templeton, said in an interview with Bloomberg Television. "There are tremendous opportunities for a recovery in these currencies."

Mr Mobius said the slump in commodities including oil may have reached or is near a bottom and the small increase in US rates on Wednesday won't have a great impact on countries with high borrowing costs such as Indonesia, whose rupiah he said was undervalued along with the Indian rupee and yuan.

In anticipation the Federal Reserve would raise its benchmark rate, investors pulled funds from developing nations this year, with the outflows compounded by slowing growth in China.

A gauge of emerging-market currencies has dropped 15 per cent this year and is headed for a third annual loss. The Brazilian real is 2015's worst performer among 24 developing- nation exchange rates tracked by Bloomberg, having dropped 32 per cent. The Colombian peso, South African rand and Turkish lira trail in its wake, with declines of 29 per cent, 23 per cent and 21 per cent, respectively.

Asian shares climbed on Thursday after the US central bank raised the Federal Funds rate target to 0.25 per cent to 0.5 per cent, from zero to 0.25 per cent. While China's Shanghai Composite Index rose 1.5 per cent and reached a two-week high, Mr Mobius said the nation's stock market is unlikely to see "dramatic" moves in 2016. Investors should be selective, he said.