Emerging markets expert speaks out over the inflation threat to sector's popularity

Popular emerging markets such as Brazil are seeing double digit losses on its stock markets as inflation takes its toll, Dr Mark Mobius, executive chairman for Templeton Asset Management, has warned.

Despite Turkey, China and India bucking the emerging market trend last month and recording positive returns, other popular markets, such as Brazil, ended the month with double-digit losses, while Russia also underperformed.

Dr Mobius said: "Inflation is one of the main threats facing emerging markets at the moment, especially in Latin America."

Elsewhere, inflation in Mexico has hit a three-year high, with consumer prices rising 5.3 per cent year-on-year in June, while the Central bank of Brazil recently lifted its benchmark interest rate by 0.75 percentage points to 13 per cent in a bid to curb increasing prices.

He added: "The rise was the Bank's largest in five years and its third consecutive increase since adopting a tightening policy in April."

Other countries struggling with inflationary pressures include South Africa, where consumers are now grappling with the highest price rises since 1998. The South African consumer price index jumped 11.6 per cent year-on-year in June, mainly due to higher fuel and food prices.

Russia has also raised its 2008 inflation forecast from 10.5 per cent to 11.8 per cent, while its gross domestic product prediction increased by just 0.2 percentage points to 7.8 per cent.