Mark Mobius: China and India Likely to Lead Asian Growth in 2015

December 28, 2014

Barron's

In the view of Mark Mobius, China and India, considered the two largest economies in Asia, will also be growth juggernauts in the coming year.

In an article written for the Economic Times, a prominent India business publication,  Mobius, who overseas emerging-markets investing at fund firm Franklin Templeton, asserts that “even with major economies like Brazil and Russia slowing down, overall growth in emerging markets during 2015 is expected to be comfortably in excess of that achieved by developed markets, with China and India likely to drive the Asian region to particularly strong growth.”

In his piece, Mobius discusses some of the broader trends that will fuel growth among a variety of emerging markets.

“Many emerging markets, among them China, India, Indonesia, Mexico and South Korea, have announced or embarked upon significant reform measures that differ in details but are generally aimed at sweeping away bureaucratic barriers to economic growth, encouraging entrepreneurship and exposing inefficient industries to market discipline,” writes Mobius, who manages the Templeton Developing Markets Fund (TEDMX), among other closed and open-end portfolios.

He adds that most emerging markets “are also looking to rebalance economic activity away from export- and investment-heavy models to become more oriented toward consumer demand. ”

Though reform measures have had some short-term costs, “we believe that, should governments succeed in driving them through, longer-term benefits could soon begin to feed into economic growth figures,” Mobius writes. “The emphasis on market discipline could also create a closer correspondence between emerging-market growth and corporate profitability.”

Mobius also discussed the role that technology can play in accelerating growth trends, “with some Internet and mobile communications-based technologies in particular offering less developed countries the opportunity to leapfrog generations of economic change in more mature markets and move directly to efficient modern systems.”

Such technological improvements, he adds, could be a particularly dynamic driver of development in frontier markets that include much of Africa.

Mobius’ optimism comes despite a number of risks which he acknowledges.

“We do not disregard issues such as the recent weak economic performances in Brazil and Russia as well as the market-unfriendly direction of policy in those countries, nor do we dismiss the potential for Chinese military assertiveness in the South China Sea to create tensions or the profound nervousness displayed by investors at any sign that US monetary policy might be tightened,” he writes. “However, we believe both Russia and Brazil have the resources to bounce back strongly should more appropriate policies be adopted. With Russia in particular, much risk already has been discounted in exceptionally low equity valuations as of December-end, though the Russian government’s unwillingness to soften its stance toward Ukraine could elicit more sanctions that result in a negative environment for investors.”

Tags: asia, china, economy, india, markets
Posted in Asia, Macro Economics, Funds