Taps Coogan – September 8th, 2022

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Mark Mobius, Mobius Capital Partners founder, legendary emerging markets pioneer, and John Templeton acolyte, recently spoke with CNBC about his outlook for markets. Simply put, he remains bearish on markets generally and bearish on Chinese markets specifically.

 

Some excerpts from Mark Mobius:

“I still think it is going to get worse for a couple of reasons. First of all, look at Europe. Europe is in deep trouble and the European Central Bank is going to have to raise interest rates dramatically… Some of the markets in Asia are beginning to outperform the US markets and that tells you a lot about how some of those countries that are not impacted by what’s happening in Europe, Ukraine, and what’s happening with oil prices, are going to do better in this market. But generally, the picture looks quite bad.”

“If you look at the emerging markets indexes, it’s terrible. They’ve been underperforming and the main reason is China. It’s 30%. China is in real trouble and it’s probably going to get worse there…”

“It’s time now to be very very picky in what you want to buy anywhere in the world… The indexes look bad for emerging markets but individual countries in some cases are going to be okay… China looks bad and we’ve had less in China than we have in India and Taiwan. Of course, with the Taiwan crisis we have to be careful… But generally speaking, the situation in China looks bad not only because of the Covid lockdowns but also because relations with the US, and with other countries as well, and because of the incredible debts that have been run up not only in property but in the Belt and Road initiative. They’ve lent billions of dollars to countries in Africa, in other parts of Asia, and even in parts of Europe. So, it’s become a situation where banks in China are going to have a real problem…”

To Mr. Mobius’s credit, he has been politely warning investors about China risks for several years (despite sounding a bit bullish back in June). Nonetheless, it’s still a remarkable thing to see emerging markets heavyweights like Mr. Mobius confirming that China’s outlook has darkened. Not all that long ago open bearishness on China was highly contrarian and likely career damaging.

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