Upbeat economic news from the United States and a stronger euro-zone bailout fund lifted investor sentiment on Thursday,supporting most stock indexes and the euro. However, the market reaction, in general, was a bit lukewarm......
Upbeat economic news from the United States and a stronger euro-zone bailout fund lifted investor sentiment on Thursday,supporting most stock indexes and the euro. However, the market reaction, in general, was a bit lukewarm.
Not surprisingly though, said Mark Mobius, executive chairman of Templeton Emerging Markets. "Passing the ruling in German
Parliament is only one step. Implementation is the next step and of course that will take time," he believed.
But he acknowledged that the German nod for European Financial Stability Facility (EFSF) expansion is the right step
towards solving the EU crisis.
Mobius feels global markets are not necessarily moving rationally and that volatility is here to stay at the moment. "The
fundamentals are still excellent for emerging markets. The growth is good and I think we will pull through this very
nicely," a confident Mobius asserted.
Giving his views on Indian markets, Mobius said, valuations need to correct further in India. "What we need in India is
more choices — more stocks, more privatization, more largecap companies coming in the market — so that the valuations will
be pushed down to more reasonable levels," he said.
Below is the edited transcript of Mobius' interview with Udayan Mukherjee and Mitali Mukherjee of CNBC-TV18. Also watch the
accompanying video.
Q: The German parliament voted in favour of the EFSF expansion but the markets’ reaction was a bit lukewarm. What did you
takeaway from that vote and how the markets reacted last night?
A: Well the vote isn’t quite positive and as I expected they will eventually come true. They are now trying to hold the
Greek’s feet to the fire as well as Portugal to extract as many reforms as possible before they give them any money. It is
back and forth and that taking place is quite beneficial.
At the end of the day unless they get some concessions in reform this is not going to be good for the long-term future of
EU. I am not surprised that market has had a lukewarm response because voting in the German parliament is only one step,
implementation is the next and that will take time. Also, they have got to get other countries on board as well.
Q: The expectation though was that the clearing of this vote may lead to some kind of technical bounce back in markets. Is
that likely you think or may markets remains quite range-bound ahead of an eventual resolution whenever it may happen?
A: Yes, you can see this back and forth. These markets are not necessarily subject to rational thinking. We have high speed
trading and high velocity trading, which means that computers are trading and not people. This makes decisions sometimes
irrational.
In addition to that there are number of other factors that work, like currency factors etc. We have to expect lots of
volatility but the fundamentals are still excellent for emerging markets. The growth is good and we will come through this
very nicely.
Q: Are you seeing any improvement in risk appetite though because we are not seeing too much by way of money flows into
this part of the world. When do you think that changes? People start sort of adjusting themselves, sort of lining
themselves to the European situation and start throwing money into this part of the world?
A: Emerging markets are still getting net inflows. They are not as high as they were earlier when the market was very
bullish. This indicates that people want cash and they are rushing into their local currencies whether it’s the US dollars
or Yen. At the same time there are number of people who have realised that they have got to be diversified globally.They
have to invest in emerging markets because of growth.
The problem in India is that the valuations are rather higher than what you see in other parts of world. But with the
corrections that are happening we will see more money coming into India gradually. We need more choices in India, we need
more privatisation, and large cap companies coming in the market. So, the valuations will be pushed down to more reasonable
levels.
Q: Any comfort in the sense that the market may have put some kind of floor in place because of the events of the last
couple of days or that we have seen the worst of the price damage?
A: There is definitely a floor, there is no question about that, but the floor will be different for different people. But
at the end of the day with the incredible money supply that we have seen continuing stocks are the best haven from the
long-term perspective. People are beginning to wake up to that reality going forward.....more info
Upbeat economic news from the United States and a stronger euro-zone bailout fund lifted investor sentiment on Thursday,supporting most stock indexes and the euro. However, the market reaction, in general, was a bit lukewarm.
Not surprisingly though, said Mark Mobius, executive chairman of Templeton Emerging Markets. "Passing the ruling in German
Parliament is only one step. Implementation is the next step and of course that will take time," he believed.
But he acknowledged that the German nod for European Financial Stability Facility (EFSF) expansion is the right step
towards solving the EU crisis.
Mobius feels global markets are not necessarily moving rationally and that volatility is here to stay at the moment. "The
fundamentals are still excellent for emerging markets. The growth is good and I think we will pull through this very
nicely," a confident Mobius asserted.
Giving his views on Indian markets, Mobius said, valuations need to correct further in India. "What we need in India is
more choices — more stocks, more privatization, more largecap companies coming in the market — so that the valuations will
be pushed down to more reasonable levels," he said.
Below is the edited transcript of Mobius' interview with Udayan Mukherjee and Mitali Mukherjee of CNBC-TV18. Also watch the
accompanying video.
Q: The German parliament voted in favour of the EFSF expansion but the markets’ reaction was a bit lukewarm. What did you
takeaway from that vote and how the markets reacted last night?
A: Well the vote isn’t quite positive and as I expected they will eventually come true. They are now trying to hold the
Greek’s feet to the fire as well as Portugal to extract as many reforms as possible before they give them any money. It is
back and forth and that taking place is quite beneficial.
At the end of the day unless they get some concessions in reform this is not going to be good for the long-term future of
EU. I am not surprised that market has had a lukewarm response because voting in the German parliament is only one step,
implementation is the next and that will take time. Also, they have got to get other countries on board as well.
Q: The expectation though was that the clearing of this vote may lead to some kind of technical bounce back in markets. Is
that likely you think or may markets remains quite range-bound ahead of an eventual resolution whenever it may happen?
A: Yes, you can see this back and forth. These markets are not necessarily subject to rational thinking. We have high speed
trading and high velocity trading, which means that computers are trading and not people. This makes decisions sometimes
irrational.
In addition to that there are number of other factors that work, like currency factors etc. We have to expect lots of
volatility but the fundamentals are still excellent for emerging markets. The growth is good and we will come through this
very nicely.
Q: Are you seeing any improvement in risk appetite though because we are not seeing too much by way of money flows into
this part of the world. When do you think that changes? People start sort of adjusting themselves, sort of lining
themselves to the European situation and start throwing money into this part of the world?
A: Emerging markets are still getting net inflows. They are not as high as they were earlier when the market was very
bullish. This indicates that people want cash and they are rushing into their local currencies whether it’s the US dollars
or Yen. At the same time there are number of people who have realised that they have got to be diversified globally.They
have to invest in emerging markets because of growth.
The problem in India is that the valuations are rather higher than what you see in other parts of world. But with the
corrections that are happening we will see more money coming into India gradually. We need more choices in India, we need
more privatisation, and large cap companies coming in the market. So, the valuations will be pushed down to more reasonable
levels.
Q: Any comfort in the sense that the market may have put some kind of floor in place because of the events of the last
couple of days or that we have seen the worst of the price damage?
A: There is definitely a floor, there is no question about that, but the floor will be different for different people. But
at the end of the day with the incredible money supply that we have seen continuing stocks are the best haven from the
long-term perspective. People are beginning to wake up to that reality going forward.....more info