Taps Coogan – January 1st, 2022

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Mark Mobius, Mobius Capital Partners founder, legendary emerging markets pioneer, and John Templeton acolyte, recently spoke with CNBC to warn against investing in ‘Emerging Markets’ generically without differentiating between countries, and to warn that China is likely to have ‘problems’ in 2022 as its Covid policies and tech crackdown continue to bite.

Mark Mobius on differentiating between Emerging Markets:

“I think (the differentiation) will continue… like China and India being so different from each other. So, I think it is very important to remember that in the coming year it will be differentiation which will be the key issue… It’s very very important for investors to look at each country and examine which one are going to be locked down continuously, like China, which is going to have real problems, and then you look at India which is doing really well, and Taiwan doing very well… It’s very important not to buy the emerging market index but to look at individual countries…”

On China’s credit and tech clampdown:

“In the long run I think it is going to have a positive effect because… they are not allowing companies to get overbought in various investment and cracking down on very extended credit to these property companies is a good thing, but in the short run, probably throughout this coming year, they’re going to be in trouble and their markets probably won’t do so well…”

On India:

“The only risk for India would be a diminution of the reform movement. Modi’s government has done a terrific job in embracing reform. If they let up on that and decide not to extended the reforms they way they’ve been doing, then India could be in trouble. But otherwise, things are going very well for India.”

On the effect of Fed tightening on Emerging Markets:

“There is no question that those emerging markets that are heavily indebted in US dollars are going to be in trouble. Again, companies that don’t have… US dollar debt are going to do very well, because they’ll be the winners if interest rates go up. But it’s interesting to note that the US economy is doing very very well and I think you have to chalk that up to the way the American economy is open. In other words, they have not been as severe as countries in Asia where they lock people up for two weeks at a time and so forth…”

There is more to the interview, so enjoy it above. 

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