Mark Mobius hails drinks and transport
Templeton Asset Management’s executive chairman and manager of the $3.3bn (£2.1bn) Templeton Latin America fund said Brazil’s economy was diversifying away from its traditional reliance on natural resources and agriculture – the former a key focus of many of Mr Mobius’s emerging markets portfolios.
“In my view, Brazil is among the most economically vibrant countries in the western hemisphere,” he said. “Its increasing economic strength lies in its diversity – this strength has seen it propel past the UK economy this week.”
Speaking after a visit to the Brazilian capital São Paulo – which generates one third of the country’s gross domestic product – Mr Mobius said the city’s banks were expanding their reach out of Brazil and into other neighbouring Latin American countries.
He said: “Brazil’s principal banks have enacted effective cost cutting and increased efficiency to provide a full range of banking and financial services throughout all of Latin America. Emphasis in the banking sector seems to be increasingly focusing on the attractive and growing consumer market.”
The Templeton Latin America fund has an overweight position in banks with 20 per cent of the fund exposed to the sector.
Mr Mobius said other domestic consumption-focused companies – such as beverage producers – could benefit from an expected 14 per cent rise in the minimum wage during 2011. Increased competition and the hosting of the Olympics and the football World Cup within the next four years would also drive profits in this area, the manager said.
He added: “Competition with drink producers is advancing, both from a Japanese company that acquired a local beer producer and also from a Mexican-based bottler. This advance in competition is among the key factors we take into consideration when evaluating the attractiveness of a potential investment.”
The Templeton Latin America fund – which has 59.4 per cent in Brazil – gained 85.5 per cent over five years to March 7, according to data provider Morningstar, compared with a 100 per cent return from the MSCI Latin America index.
Mr Mobius’s $2.3bn Bric fund – which has 31.6 per cent in Brazil – has also underperformed over five years, gaining 33.7 per cent compared with the MSCI Bric index return of 64.9 per cent.