Tuesday, March 16, 2004
Valuations, potential upside make Asia buy: Mobius
Reuters Hong Kong, March 16
Attractive stock valuations and huge potential upside compared to Europe and the United States means that now is the time to invest in Asia, emerging markets guru Mark Mobius said on Tuesday.
"The forward price earnings ratios of Asian companies are much lower than the US and Europe," Mobius, managing director of Templeton Asset Management, said in a presentation to reporters in Hong Kong.
"Potential increases from where we are now to the high point of these markets could be as much as 400 per cent in the Philippines, 300 per cent for Red Chip stocks in Hong Kong, and 200 per cent for Indonesia," said Mobius.
At present, Templeton's Asian Growth Fund is overweight South Korea, Thailand and the Philippines, while it is underweight Greater China, Singapore and India. Mobius said there was room for China, as well as India, Singapore and Malaysia to grow in the portfolio.
He said that Templeton's investment approach at the moment was based around what he called the "three Cs" of consumer, commodities and convergence plays.
The latter, referring to the increasing convergence of the economies of Hong Kong and China, Taiwan and China, Korea and China, and Korea with the rest of South East Asia, said Mobius.
In terms of sectoral allocations, Templeton's Asian Growth Fund is currently overweight industrials, energy stocks, telecoms, consumer staples and basic materials. But is strongly underweight financials and information technology companies.
"IT stocks are relatively expensive, but on the other hand utilities are quite attractive because of yield," Mobius said. "You have a situation in China where the demand (for power) from industry is outstripping supply."
Mobius said that corporate governance remained a major concern for Templeton, but he noted that given the Enron and Worldcom scandals in the US and the high profile problems of Parmalat in Italy, it was not simply a problem for Asia.
Templeton has been embroiled in a bruising battle with South Korea's SK Corp, backing Sovereign Asset Management's efforts to try and oust the founding family from the country's largest oil refiner following the discovery of a $1.3 billion accounting fraud.
But Mobius said that one of the reasons Templeton was overweight Korea was because they anticipate reforms will enhance shareholder value.
"Korean companies are undervalued for that reason, because of corporate governance," said Mobius. "We see changes in corporate governance in Korea which will enhance future value."
© Hindustan Times Ltd. 2004.