Franklin Templeton’s Michael Hasenstab has said now is the time to buy emerging markets, some of which have been “indiscriminately punished” in recent days.
Global equities sold off at the start of this week after China’s 8.5 per cent plummet on Monday, with Beijing’s decision to devalue the yuan widely seen as a catalyst for the latest nervousness.
In recent years, an increasing number of investors have used price falls to snap up cheap deals, but asset allocators concerned about market volatility have been more cautious this week.
However, Dr Hasenstab said the yuan weakening “is not a signal of massive depreciation to come” for either the renminbi or other Asian currencies, and said recent panic has been overdone.
As such, Dr Hasenstab, thinks investors’ fears regarding emerging markets has led to countries being “indiscriminately punished”.
The manager sees particular opportunities in the Mexican and Malaysian currencies.
Dr Hasenstab said Malaysia, which has come under scrutiny due to its status as a net exporter of commodities, “maintains a healthy current account surplus and holds a large cushion of international reserves”.
Similarly, investors have panicked about Mexico, pushing down the value of the peso to its lowest level since 1990.
But the manager believes the country is well placed to benefit from the “improving economic environment in the United States”. He also stands by his view that the US will hike rates this year.
Back in Asia, the Templeton Global Total Return Bond manager said he is still content with his positions in the region.
He said: “The thesis as to why we are invested in Asia remains unaltered: we expect growth in China to moderate, but not experience a hard landing.”
