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 Mark Mobius, executive chairman of Templeton Asset Management
JoI: Do you think the global economy has turned the corner? What do you expect for the next few years or so?
Mark Mobius (Mobius): The bank supply increase that we’ve seen will continue to support the economies around the world, so we see a continued recovery despite what has been happening in Greece and in Europe. As you know, the Europeans have stepped in to pump money into the system. As long as that’s happening, I expect to see recovery continuing.
JoI: Do you think emerging markets in general have recovered from the global financial crisis? How do you think they are positioned going forward, in particular?
Mobius: Emerging markets definitely have recovered. You can see it in the growth statistics: China is growing at 9 percent, India at 7 to 8 percent and most markets are growing at over 3 or 4 percent. More importantly, emerging markets are in a very strong financial position because their foreign reserves are far greater than that of the developed countries, and their debt-to-GDP ratios are lower. So from that aspect, these emerging markets are doing very well.
The global meltdown, of course, affected emerging markets—but it was mainly because of sentiment from the West. In fact, the fundamentals of these emerging markets were still quite good. And of course, now they’re even better.
JoI: What could go wrong in China?
Mobius: What could go wrong would be a disintegration of the government-led programs to increase spending on infrastructure and a general tightening of credit and money supply. That could be bad for China. But I don’t see that happening.
JoI: Should emerging market bonds trade at a premium or a discount to developed market bonds?
Mobius: Generally speaking, they should be trading at a premium. The emerging markets are in a better financial position because of their higher foreign reserves and their lower debt-to-GDP ratios. Of course, you have to look at it on a country basis. Argentina, for example, got a very, very bad rating and deserves it. But then if you look at countries like China, India, even Russia and Turkey, these have much stronger financial positions.
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