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Despite downgrades and protests, equity guru Mobius believes SET will rise further

Apr 07. 2014
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THAILAND'S stock index could |rise further even though the country's sovereign credit outlook was downgraded last week by a Japanese agency as the political crisis persists, according to veteran emerging-markets investor Mark Mobius.

Mobius, executive chairman of the Templeton Emerging Markets Group, remains optimistic about Thailand’s economy and its stock market although the Japan Credit Rating Agency (JCR), citing prolonged political unrest, downgraded the country’s credit outlook to “negative” last Thursday.

“The political crisis is rather |isolated and will not much affect |the main market processes themselves,” he said from Hong Kong during a phone interview to TV NOW 26 channel recorded on Friday.

“In fact, we see signs of recovery right now, and there is a good chance [of the] market doing well going forward.”

Mobius oversees assets management worth about US$50 billion (Bt1.6 trillion) in emerging markets ranging from Thailand to South Africa.

Referring to the street protests that have taken place in Bangkok since late last year, he said political debate would continue but business would continue as well.

The baht has weakened from the 2012 exchange rate of below 30 per US dollar to about 32 now. This would be beneficial for Thai exports, which would contribute to the whole economy, he said.

Asked about the possibility of other rating agencies such as Moody’s Investors Service, Standard & Poor’s and Fitch Ratings following JCR’s move, he said the combination of a weak baht and market discounts would support Stock Exchange of Thailand. “Of course, there is a problem along the way, but I think it’s temporary, not lasting.”

Asked why he is so optimistic about the Thailand economy and |the SET, he said: “It is mainly because [of the] entrepreneurial spirit of Thai businesspeople and very good ethics of Thai workers.” Thais were diligent and hard-working, qualities that attract foreign investment.

“So if Thailand continues to be a nice place to invest, we like to invest in Thailand [for those reasons,” he said.

The general environment of Thailand was also conducive to business, he added.

While some analysts prefer investment in the Philippines and Indonesia stock markets over Thailand because of the prolonged political crisis here, Mobius said he wanted to include Vietnam, Indonesia and Thailand as among the best places for investment. |And don’t forget China and India, since they are very important, he argued.

Asked about the recent sharp increase in investment abroad |by Thais, Mobius said it was a |natural process for investors around the world to diversify. It should not present a major problem.

He dismissed the possibility |of sharp capital outflows from emerging markets when the US Federal Reserve raises its benchmark interest rate in the future from 0.25 per cent currently.

He said that in the long run the US rate would rise to curb inflationary pressure, but capital outflows from emerging markets would not be a worrying issue.

He believes that as emerging markets have a faster economic-growth rate, eventually investors will come back as they realise where the growth is.

He expects rising interest rates may lead to a surge in investment in emerging markets in a quest for better returns.

Nor does he worry about the impact of the Ukraine crisis.

“In the short term there is un-|certainty, but if you look at the behaviour of the actual market, you would notice that the market has not really been affected that much,” he said.

Even the Russian market has |not been greatly affected, Mobius said.

“At the end of the day we’ re |looking at the stock prices. Stock prices in Russia went down [initially] but now you see a little bit of recovery.”

Russia and Europe would come to an agreement on how to handle that situation, Mobius said with optimism.

His investments in Africa |also yield high returns because of fast-growing African markets, he said. And he believed this fast growth in Africa would con-tinue.

Economic slowdown in China was not much of a concern for Mobius.

“As China goes through reforms, in the long run it will be positive for the country. In the short run people will hear a lot about bankruptcies, etc,” he said.


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