Mark Mobius is an investment manager with Franklin-Templeton that I have invested with for over a decade (through the Templeton Emerging Markets Trust and Templeton Dragon Fund – they are closed end funds). I believe in Templeton’s emerging market investment team and Mark Mobius and believe his thoughts are worth paying attention to. He recently wrote an overview on Emerging Markets:
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In Mexico, GDP contracted 10% y-o-y in the second quarter of 2009 as a result of the global economic crisis and swine flu outbreak. In comparison, GDP fell 8% in the first quarter of the year. Declines in the manufacturing, construction and retail sectors had negatively impacted GDP during the period.
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Since 1995, portfolio inflows into emerging markets have totaled more than US$123 billion. A significant amount, considering it includes the US$49 billion in net outflows in 2008 as a result of the global financial crisis. The recovery in emerging markets and hunt for attractive investment opportunities, however, saw these funds return just as quickly with inflows totaling more than US$44 billion in the first seven months of 2009, nearly 90% of the outflows registered all of last year.
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Emerging markets account for more than 80% of the world’s population. With economic growth accelerating and population growth decelerating, per capita income is one the rise. In our view, markets such as China, India and Brazil stand at the front of the class.
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As of end-August 2009, the benchmark MSCI Emerging Markets index had a P/E of 16 times, cheaper than the MSCI World index which was trading at a P/E of 21 times.
Emerging markets have risks and the data is less trustworthy than that in the rich countries (and remember the rich countries markets have plenty of accounting scandals themselves). Looking out 20 years it seems likely (not certain but likely) that Brazil, China, India, Mexico, Thailand, Vietnam, Costa Rica, Ghana… will grow economically more quickly than the USA, Japan, UK, France and Germany.
Related: The Relative Economic Position of the USA is Likely to Decline – Easiest Countries for Doing Business in 2008 – Government Debt Compared to GDP 1990-2007 – Oil Consumption by Country in 2007 – Top 12 Manufacturing Countries in 2007 – China May Take Car Sales Lead from USA in 2009
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Mark Mobius on Emerging Markets
It is always nice to hear from an informed long-term investor. John Hunter writes, “I have invested with for over a decade (through the Templeton Emerging Markets Trust and Templeton Dragon Fund – they are closed end mutual funds).”
I don’t know what country John Hunter invests in. But in the United States there is no such thing as closed end mutual funds.” A closed-end fund like Mobius’s (EMF) traded on the New York Stock Exchange is, well it is closed-ended, and a mutual fund is open-ended. Which is it John; it cannot be both closed-end and open end.
Closed-end funds are to the advantage of investors, mutual funds are for the advantage of management companies. Which is why indexes are being developed to reduce the conflicts of interests brought about by mutual funds.
It was just a slip of the keyboard, I meant closed end fund – I updated it.