Mark Mobius, managing director of Franklin Templeton Investments, said on Friday during a whistle-stop visit to South Africa that the reason for the strong growth seen in China and India was because of a high savings rate, and that this was a key reason for South Africa to improve its savings rate.
“The lesson for SA is that your savings rate has to move up,” he said.
“In China you have 10% growth and a savings rate of over 50%. In India the savings rate is around 27 to 28%,” he pointed out.
“The good news is that in general inflation is down in emerging markets,” he added.
Mobius said that the inflation rate of over 1 000% in Zimbabwe was actually not high when you compared it to Brazil, where it went up over 3 000% at one stage.
“When I was in Brazil during that period someone told me that the rate at 3 000% was wonderful because last week was it was 4 000%,” he joked.
Bulls outlast bears
Mobius said the bulls had outlasted the bears in emerging markets and that his preference was to put money where “other people weren’t going”.
“When’s the best time to invest? The best time is when you have money — because the chances are that you will hit a bull market more than a bear market — and then if you stay around long enough you will get back the money you lost in the bear market,” said Mobius.
Mobius pointed to a chart which showed that since 1988, emerging markets averaged 116% growth in a bull market over the average 25 months time span, and averaged -33% in a bear market over an average seven months.
“It may surprise you but Eastern Europe is the best performing market in the last five years. Our money is now in Turkey, which hasn’t gone up, but the bottom line is they are good, cheap stocks. We put money where other people aren’t going,” explained Mobius.
“On average the growth in emerging markets has been better than in developed markets since 1987,” he pointed out
“The two most populated countries — China and India — are growing the fastest — with tremendous implications in the world today.
“Bush and the Middle East pales in comparison to the growth story in China and India,” he said.
Edcon bid ‘too cheap’
Mobius said that he did not think the bid for South African retailer Edcon was high enough.
“The Edcon bid is too cheap. It should be much higher. Shareholders should urge more bids,” said Mobius.
On Thursday Edcon said its board has unanimously recommended to shareholders an offer from global private investment firm Bain Capital to acquire its entire ordinary share capital at R46 per share.
The total value of the transaction would be R25-billion.
Completion of the transaction will result in the de-listing of Edcon shares from the JSE.
“We think many South African shares are still cheap,” he added.
“We are seeing a tremendous amount of convergence globally — which is convergence between markets around the world. And this private-equity bid in SA is a part of this process,” he concluded.
Mobius’s company manages $33-billion in emerging-market assets. – I-Net Bridge