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Mobius eyes smooth sailing in SEA

Mark Mobius, one of the world’s best known emerging market investors, sees bargains in Southeast Asian stock markets, especially Vietnam, but said on Thursday that it was too soon to start investing in fast-changing Myanmar.

Mobius, executive chairman of Templeton Emerging Markets Group, which oversees US$50 billion in emerging markets funds, said frontiers would outperform other emerging markets, but despite Myanmar’s potential in energy, manufacturing and consumer sectors, it was “too early” to invest there.

Despite moves to overhaul its economy, Myanmar still had some issues with its kyat currency and its rudimentary banking system, Mobius said during a presentation in Bangkok on Thursday.

The year-old civilian government has initiated a wave of reforms in the past eight months that have stunned the world after decades of isolation under military rule, but the process is still seen as fragile.

Its boldest economic reform so far is its “managed float” of kyat, which began only on Monday and replaced its multiple black-market rates. It has started to overhaul its fledgling banking system, but that could take time due to a lack of capacity, economists say.

For now, Mobius said established Southeast Asian markets would continue to perform well. He pinpointed Vietnam as an attractive bet, but did not elaborate.

Foreign fund flows gave a strong boost to Southeast Asian emerging markets this year, including the rallies of stocks in Malaysia, Indonesia and the Philippines to all-time highs and Thai stocks to 16-year highs.

“All Southeast Asian stock markets are going to do quite well,” he said.

Vietnam is trading at 13.0 times this year’s projected earnings, higher than the 12.5 times of Malaysia, 12.3 times of Indonesia and 11.3 times of Thailand, according to Thomson Reuters Starmine.

The Philippines is trading at 15.5 times, the highest in the region ahead of Singapore’s 13.8 times.

His fund was still buying Thai stocks and preferred oil and gas and banking shares, Mobius said. He added that Thailand was not expensive, despite recent sharp gains of the Thai market.

Thailand’s benchmark SET index has risen 16.85 percent this year, making it Southeast Asia’s second best performing bourse, trailing a 25.09 percent gain in the small Ho Chi Minh Stock Exchange.

Mobius said he liked growth potential of emerging markets where he invested with two themes-consumption and commodities and Indonesia’s motorcycle sales had illustrated the strong level of consumption in emerging markets.

Valuation for those markets on average was still attractive and the markets were still under-owned, added Mobius, who joined Templeton in 1987.

The performance of emerging markets was not so good last year because high supply of IPO in Asia that ate up money from stock markets, he said.

The 12-month forward price to earnings was at 10 times as of February this year versus peak level of 28 times in May 1988 and the bottom of seven times in November 2008, he said.

In terms of historical performance, Latin America led other emerging markets, followed by Asia and Eastern Europe, he added.

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