Emerging Markets – Especially BRIC Economies – "Bottoming"

By Mike Caggeso
Associate Editor
Money Morning

Emerging markets investors have always had famed investor Jim Rogers on their side. Now – after the bubbles of China, India, Latin America and more have popped – they can take comfort in the word of investor Mark Mobius, who said emerging markets are “bottoming” en route to a bull phase in 2009.

In a recent interview with Bloomberg Television, Mobius said there are “terrific bargains all over the place” and his biggest holdings are in Asia, adding that he is “aggressively” purchasing Chinese stocks.

Emerging market stocks have nosedived this year at a much faster pace than indices from larger, more affluent economies. So far this year, The MSCI Emerging Markets Index, a benchmark for equities in 24 developing nations, has fallen 53% – driven mainly by falling commodity prices and a freeze in credit globally.

Russia’s stocks were slugged the hardest; its equities have dived 72% this year. India’s stocks have fallen 65% this year. Brazil and China stocks are down 56% and 52%, respectively, this year, MarketWatch reported.

“We’re beginning to see this bottoming situation,” said Mobius, who oversees about $26 billion in emerging-market stocks as executive chairman of Templeton Asset Management Ltd. “I sincerely believe that next year we’re going to be beginning the next bull phase. The amount of money going into the system has to find a home.”

He’s got a point. The BRIC economies – Brazil, Russia, India and China – each unveiled stimulus plans aimed to spur domestic consumption and boost GNPs.

• Brazil’s government called for $3.6 billion in tax cuts on personal income, consumer loans and automobiles.

• In November, Russia Prime Minister and former President Vladimir Putin unveiled a $20 billion stimulus, which included a cut in profit tax.

• India’s government said in early December it would spend $4 billion more from December to March 2009 than previously planned.

• China’s $586 billion economic stimulus plan is one for the record books. The infrastructure overhaul will pump boatloads of money into low-income housing, water and energy projects, airports, disaster relief and new railroads over the next two years.

And those stimulus plans are on top of several interest rate cuts from each BRIC economy.

“What you are going to see is a reversion to emerging markets first because those markets are the cheapest” and the economies are growing faster, Mobius told Bloomberg. “There’s no reason why, going forward, they shouldn’t be the first ones to get the attention of investors.”

News and Related Story Links:

• Bloomberg:
  Mobius Says Emerging Markets Are Bottoming, Will Jump

• Wikipedia:
  Mark Mobius

• MarketWatch:
  Emerging markets: the best and the worst of 2008

• Money Morning:
  Four “Safe Haven” Markets For U.S. Investors

• Bloomberg:
  Brazil Announces $3.6 Billion Tax Cuts to Spur Growth

• Reuters:
  Crisis will not sink Russian economy – Putin

• Wall Street Journal:
  India Unveils Stimulus Moves After Central Bank Cuts Rates

• Money Morning:
  Massive China Stimulus is Viewed as an Attempt to Help the West