When I last caught up with legendary investor Mark Mobius six months ago, he was putting money into his open-ended Templeton Frontier Markets Fund, expecting big growth. (If you are a subscriber to IndexUniverse.com’s subscription-only ETFR publication, you can see the story here.) So far this year, a lot of that growth has materialized: Year-to-date, that fund is already up 45 percent.

At the same time, frontier market exchange-traded funds across the globe have followed a similar growth trajectory: The Market Vectors Vietnam ETF (NYSEArca: VNM) is up 20 percent; iShares MSCI All Peru Capped Index Fund (NYSEArca: EPU) has jumped 40 percent; and the Market Vectors Africa ETF (NYSEArca: AFK) has soared 45 percent. Eastern Europe is the only region that has lagged.

In the first part of this two-part series on emerging and frontier market investing, IndexUniverse.com interviews Mark Mobius about his views on the global economic recovery, asks where he is putting his money, and what the risks are. In the second part, we will examine some of the ETFs that investors can use to take advantage of Mobius’ investing strategies.

IndexUniverse.com: The Dow has passed 10,000 points and the global economy looks on the way to forming a strong recovery. What are the drivers here behind such a quick about-turn in asset prices, and is it sustainable?

Mark Mobius (Mobius): The performance of markets has lots has to do with the continuing weakness of the dollar. What is happening is that there is a retreat out of dollars into other currencies and into stocks and commodities. That combination is what’s driving the current rebound. I’ve mentioned a number of times lately, however, that there is always a chance of more corrections along the way, and we may still be in a secular bull market.

IndexUniverse.com: What sectors are you most excited by right now?

Mobius: Energy and consumer products, mainly. We like companies that are gaining market share—consumer banks that are able to capture the growing consumer credit market [in emerging market countries] look promising here.

IndexUniverse.com: What will be the most exciting areas of the world to invest in next year?

Mobius: If things continue on the track they are running on now, then the frontier markets are going to be the place to be, because as the valuations of these larger markets move up, there will be a search for more value in small-cap emerging markets stocks and the frontier countries—that whole area is becoming quite interesting. In terms of major markets, Eastern Europe and Russia will do well next year, because they have lagged. There is lots of value in Russia right now.

If you look at our portfolio, you will see China right at the top, followed by India, but it’s Russia that will continue to come up next year. In Russia, the sectors that are most interesting are energy, raw materials and there is an insidious consumer market. The consumer story in Russia is particularly interesting. Romania is another one of those frontier areas that I like a lot.

IndexUniverse.com: With the Latvian currency crisis, isn’t there a lot of risk in these markets though?

Mobius: It’s precisely because of the perceived risk of places such as Latvia and Lithuania that stocks are down so much in the region. That presents an opportunity to invest at a great price, because those countries are not going under as the Latin American ones have done in the past. Currency experts have recently pointed out that Latvia and Estonia could both adopt the euro if they wished to, since they have enough currency reserves to convert [to euros]. So, if the worst comes to the worst, then they could adopt the euro. In that sense, I’m not worried at all about the macro side—it’s true that the economy has seen an incredible shrinkage recently, but next year there’s going to be a pretty strong recovery.

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