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The Mobius bear buys cheap
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October 28, 1997: 2:50 p.m. ET
Investment director Mark Mobius looks forward to the corrected market
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NEW YORK (CNNfn) -In the wake of Monday's stock plunge, CNNfn correspondent Beverly Schuch asked Mark Mobius, director of Templeton Asset Management, to speak with her and CNNfn anchor John Defterios about his take on just what happened and what we can expect from the near future. A transcript of that Trading Places interview follows.
BEVERLY SCHUCH: Nice to have you here, and thanks for joining us from Mexico. We know that Sir John Templeton would say this is a buying opportunity. Is it for you?
MARK MOBIUS: Yes, it is -- or it soon will be. We don't know where these markets are going to settle but we think it's beginning to look very cheap.
JOHN DEFTERIOS: We had some concerns yesterday, Mark, because of the peso falling. It stabilized this morning. The finance minister of Mexico, Garrimo Ortiz, said there's really no fundamental reason for the peso to come back. Do you feel the same and have we gotten through the worst of it already?
MOBIUS: Yes, I think we'll have more volatility, however, so we've got to expect further downturn. But fundamentally there's no reason why it should move from where it is now.
SCHUCH: We understand that Brazil has adopted some similar circuit breakers as we saw yesterday on the New York Stock Exchange. Do you expect this to kind of go throughout Latin America?
MOBIUS: I think it's probably a good idea to have these circuit breakers all over the world, to prevent this kind of volatility on the short-term basis. Of course, on a long-term basis, volatility is probably good because it helps the market adjust.
DEFTERIOS: As you know, Mark, during times of trouble, you seek out some of the markets that have Achilles' heels. Brazil is one of them. Beverly brought it up here.
Brazil has a current account deficit approaching 5 percent of GDP. That makes it quite vulnerable to selling attacks here. Argentina keeps its currency pegged to the U.S. dollar with a currency board that's similar to Hong Kong's. Do you think those markets are going to continue to be tested, even after this euphoria dies down a little bit?
MOBIUS: Well, regardless of the currency, I think Argentina is probably in good shape. Brazil less so, because of the reasons you mentioned. As we got to the markets, we probably will see further downturns, but not significantly so from where we are now.
SCHUCH: And Mark, your advice to investors, both in your funds and in other emerging market funds?
MOBIUS: Relax. Take a vacation. Buy more of the funds because now is a good time to buy.
DEFTERIOS: We've had incredible runs in Brazil and in Mexico, in particular. Were they getting a little bit toppy? Were people not factoring in the risks? I know Alan Greenspan, the Federal Reserve Chairman in the United States, was saying that basically, nobody was factoring any risk at all for political problems or the currency vulnerabilities that we were talking about. That people got ahead of themselves.
MOBIUS: Yes, I think that was true in Brazil and also in Argentina. Less so in Mexico. So there was a toppy feeling, so to speak, and now we've had this correction and it's probably very healthy.
SCHUCH: I want to go back to my question about advice for investors, Mark. I know you are doing a lot of research in Russia. That market has had the most tremendous run up in the past couple of years. If you were going to put money now in some sort of a global mutual fund, where would you go -- between all the world markets -- between Asia, South America, Latin America, and some of the Eastern European countries?
MOBIUS: Well, I think global emerging markets funds are still the best because you have the diversification and less volatility, but if you wanted to select one area of the world, obviously Asia would be the place. Because places like Thailand and Malaysia, Indonesia, Philippines, have come down far further than anyone expected, and certainly far further than the Latin American markets.
DEFTERIOS: There's some debate, in fact, that economic growth for 1998 will not be strong. But now that their currencies have been devalued, forced upon them I should say, do you think, in fact, they'll rebound quite nicely in 1998?
MOBIUS: I think 1999 is probably a better bet. I think in 1998, they'll have corrections in their markets and economic growth will slow down. But 1999 will probably be a good year.
SCHUCH: All right. Mark Mobius, thank you very much for joining us from Mexico.
MOBIUS: Thank you. Thank you very much 
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