'Impact of US subprime on markets over'
Emerging market stocks are expected to rebound further or extend gains as they did in Hong Kong & Thailand.
By Agencies |
SEOUL: The impact of US subprime mortgage losses on global markets is ‘over’ but the economic fallout may last another ‘three to four years,’ according to Mark Mobius, managing director of Templeton Asset Management.
“You must separate the economic impact and the stock market impact,” Mobius, who oversees $38 billion of emerging-market assets, told reporters in Seoul on Wednesday. “The stock market has already discounted all of the subprime problem.”
Concerns of widening credit crisis, sparked by losses on US home loans made to higher-risk borrowers, would derail global economic growth had triggered an equities selloff in July. It erased more than $5.5 trillion of the market value worldwide.
The Morgan Stanley Capital International Emerging Markets Index tumbled as much as 18% in less than four weeks after it closed at a record 1,163.13 on July 23. It’s still down 6.4% from the high. Mobius said he expects emerging market stocks to rebound further or to extend recent gains as did Hong Kong and Thailand, which he said were his ‘biggest overweights’ in Asia.
It is a ‘big mistake’ not to include the Hong Kong market in global emerging-market indexes compiled by MSCI Barra and FTSE Group, Mobius said, because it is ‘a proxy to China.’
Mobius said South Korea should not be granted developed- market status in global indexes yet. It is `’rather premature’ for an upgrade because of the negative economic effects from an ‘eventual’ unification with North Korea, he said. “When North Korea and South Korea merge, the per capita income of the whole country will go down, which means that Korea will qualify in the lower per-capita income group of emerging markets,” he said. South Korea has been on FTSE’s ‘watch list’ for possible inclusion in developed-market indexes since 2004.
FTSE will announce its decision on September 20. An upgrade may bring net inflows of up to $14.6 billion into South Korean stocks, Good Morning Shinhan Securities said in a September 10 report.
“You must separate the economic impact and the stock market impact,” Mobius, who oversees $38 billion of emerging-market assets, told reporters in Seoul on Wednesday. “The stock market has already discounted all of the subprime problem.”
Concerns of widening credit crisis, sparked by losses on US home loans made to higher-risk borrowers, would derail global economic growth had triggered an equities selloff in July. It erased more than $5.5 trillion of the market value worldwide.
The Morgan Stanley Capital International Emerging Markets Index tumbled as much as 18% in less than four weeks after it closed at a record 1,163.13 on July 23. It’s still down 6.4% from the high. Mobius said he expects emerging market stocks to rebound further or to extend recent gains as did Hong Kong and Thailand, which he said were his ‘biggest overweights’ in Asia.
It is a ‘big mistake’ not to include the Hong Kong market in global emerging-market indexes compiled by MSCI Barra and FTSE Group, Mobius said, because it is ‘a proxy to China.’
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“Hong Kong is China,” Mobius said. “The investment, activities, sales, profits, increasingly of Hong Kong companies are coming from China.” Hong Kong’s stock market is benefiting from increased linkage to China’s economy. Shares of Chinese companies accounted for about 59% of the value of trade on Hong Kong’s exchange this year through July, up from 1997’s 38%, the bourse’s website shows. The Hang Seng Index closed at a record 24,310.14 Wednesday. Mobius said South Korea should not be granted developed- market status in global indexes yet. It is `’rather premature’ for an upgrade because of the negative economic effects from an ‘eventual’ unification with North Korea, he said. “When North Korea and South Korea merge, the per capita income of the whole country will go down, which means that Korea will qualify in the lower per-capita income group of emerging markets,” he said. South Korea has been on FTSE’s ‘watch list’ for possible inclusion in developed-market indexes since 2004.
FTSE will announce its decision on September 20. An upgrade may bring net inflows of up to $14.6 billion into South Korean stocks, Good Morning Shinhan Securities said in a September 10 report.
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