Mobius: value investing fared badly

Mobius: value investing fared badly

Emerging markets stalwart Mark Mobius has said his value-investing approach is responsible for the short-term lacklustre performance of his £2bn trust.

The manager’s Templeton Emerging Markets Investment Trust has seen its shares underperform the trust’s benchmark index over three- and one-year periods, according to data from FE Analytics.

The trust’s shares rose 3.7 per cent in the past year against a 12.2 per cent rise in the MSCI Emerging Markets index, according to FE Analytics data. Meanwhile, over three years the trust rose 3.1 per cent against the benchmark’s 11.2 per cent rise.

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“Value investing has underperformed growth since 2011 and growth investing has contributed to much of the positive emerging markets performance,” Mr Mobius said.

The trust’s long-term performance is strong though, with its shares up 224 per cent in 10 years against the benchmark’s 131.4 per cent rise, according to data from FE Analytics.

Mr Mobius does have 30 per cent of his trust in China- and Hong Kong-based stocks though, and, given the Chinese stockmarket has rocketed in the past year, his trust could be due a bounce back.

The manager was also upbeat on the potential for some of his holdings that are linked to commodities.

“We have a number of stocks that will benefit from a recovery in commodity prices and the general uptrend in a number of the emerging markets, particularly China,” the manager said.

Energy stocks made up 18.3 per cent of his portfolio at the end of March, his third highest allocation by sector.

When it comes to regions, Mr Mobius said China was the most attractive country in Asia for UK investors as the authorities continued their major reform programmes.

In April, the People’s Bank of China cut the reserve requirement ratio by 100 basis points (bps), double the 50bps that had been expected.

The ratio is the amount of capital banks must hold against their liabilities, such as loans. The higher the ratio, the more constrained banks are to lend and vice versa.

A cut of this magnitude had not been seen since 2008, with more recent cuts coming in at 25bps and 50bps.

Fund managers and economists who cover Asia have said they expected further action, as the cut is likely to be a response to relatively weak economic data.

But Mr Mobius warned that investors would experience “significant corrections along the way” from China.

He said government policies across most of Asia “appear strongly favourable for economic growth”, with Thailand and Singapore expected to do particularly well. Thailand is the manager’s second largest country allocation making up 14.1 per cent of his portfolio.

On the topic of external factors, Mr Mobius believes “there will be a relatively small impact” on Asia from a US rate rise.

He said: “The Asian economies are at different stages of [their] policy programmes with a number of countries, particularly China, looking to stimulate their economies with low interest rates.”