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Friday, December 19, 2008

Best time to buy long-term investments -Mark Mobius

Answers on key issues from renowned investment guru of emerging markets and executive chairman, Templeton Asset Management, Dr Mark Mobius.

The current global environment is not only depressed, but highly uncertain too. While India may be relatively better off, the health of her economy has deteriorated and is not showing any signs of recovery. The fall in industrial output, slowdown in GDP growth and expected decline in corporate earnings remain major worries for the markets.

Answers on key issues from renowned investment guru of emerging markets and executive chairman, Templeton Asset Management, Dr Mark Mobius. Known for his understanding and studies on emerging markets, Mobius currently manages more than $24 billion in emerging market assets and directs the Templeton research team based in 14 emerging markets across the world. A value investor with a bottom-up stock selection approach, Mobius shared his views on the Indian equity markets and spelt out his investment strategies.

How do you assess the economic stimulus package announced by the Indian government and RBI’s steps to ease liquidity and interest rates? Will this be enough in the present context?
The scope of the government is fairly limited as the fiscal situation is not very comforting. If infrastructure is carried out through public-private partnership models, then the cost of funding would become important, which is more difficult in this environment. Thus, we think that although the intention is right - there could be more creative ways of doing those projects.

Would a long recession, particularly in the developed countries like US and Europe, potentially mean more problems for emerging economies like India?
India still appears better off as compared to many other economies because of the strong domestic economy and relatively lower dependence on trade. However, India too will feel the effects of the slowdown. The best solution to the crisis would be further opening up of the economy and even further reduction in the bureaucracy.

How are you reading the outcomes of elections in some of the Indian states?The overall economic reforms have sustained despite changes in governments. It is heartening to see that the developmental agenda is strongly rooted in the populace and many political pundits have opined that governments, which have come back to power, have delivered more on the economic front.

What is your assessment of the equity markets? How long will the volatility continue and, whether there are more risks in terms of correction in the markets?
A lot of the pain in the financial markets is behind us. However, the real economy would probably see more bad news in the coming days - even though marginally, things are actually getting better and a lot of the froth of the previous bull market is now over.

How does the Indian equity market compare vis-à-vis other emerging markets?
India looks attractive as compared to its own history - and it is in line with other emerging markets. Overall, India seems to be in a good position to weather the economic crisis.

What is your view on commodities, especially metals and crude oil?
We maintain a long-term positive view on commodity prices. We also like commodity stocks, including in the metals space, because some of them have declined significantly below their intrinsic worth and we expect the global demand for commodities to continue its long-term growth.

What is your view on the earnings growth in the near term? According to you, what could be the earnings growth for FY09 and FY10?
Corporate earnings growth has generally weakened across the board. However, this weakness has been priced into the market. Moreover, as liquidity conditions improve, and conditions normalise, we expect earnings to improve as well.

Till now, foreign investors have been selling in the Indian equity markets. When do you think foreign money will returning to the Indian markets?
Foreign investors have actually been selling in most markets, including India. We have however, in the last few weeks, seen fund inflows turning positive in Asia. Fund flows could remain volatile in the short-term as investors continue to react to the news flow from the US and elsewhere. However, in the longer-term, we expect investors to recognise the benefits of investing in India.

What is you view on real estate prices in India? What should be the investment approach towards this sector?
While real estate prices have corrected recently, interest rate cuts and actions from the government could support prices. We believe that the longer-term demand for property remains robust in India. However, over the short-term, lower confidence as a result of tightening liquidity globally and growth concerns could keep buyers on the sidelines.

At this point in time, how would you approach the Indian equity markets in terms of sectors and mid cap/large cap mix?
We do not look at equities in terms of sectors or market caps. We follow a bottom-up investment strategy and look at stocks on an individual basis rather than by sector or market cap.

Many retail investors are already sitting on huge losses in their portfolios. What is your advice to them? How best do you think they can make of whatever they are left with (stocks and money)? What should be the fresh approach?
Each person must look at their individual situation and risk profile. If there is no immediate need for cash, then this is not the time to sell their emerging markets position. If they have extra cash to put into long-term investments, then this is the best time to buy. The reason: growth. Emerging markets will continue their high growth rate and investors should try to capture that growth.
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