Mobius Says Money Supply to ‘Explode,’ Lift Markets (Update3)
June 4 (Bloomberg) --
The money supply is set to “explode” worldwide and boost emerging-market stocks as central banks pump cash into the financial system to counter the global recession, Templeton Asset Management Ltd.’s Mark Mobius said.
“Everyone is scared of deflation, so they are printing money,” Mobius, who helps oversee about $20 billion of emerging-market assets as E.xecutive chairman of Templeton, said at a press briefing in London.
“It’s beginning to flow out, with greater confidence, into emerging markets.”
The
MSCI Emerging Markets Index, a 22-country benchmark for developing-nation equities, surged 37 percent this year as central banks led by the U.S. Federal Reserve reduced interest rates and purchased assets to revive economic growth. The European Central Bank and the Bank of England today kept their benchmark interest rates at the lowest levels on record.
The Fed said its M2 gauge of money supply, which includes all currency held by consumers and companies for spending, money held in checking accounts and travelers checks, savings and private holdings in money-market funds, rose at a 9 percent annual rate in the week ended May 18, above the target of 5 percent the Fed once set for maximum growth. The central bank no longer has a formal target.
Mobius, voted among the “Top Ten Money Managers of the 20th Century” by the Carson Group, said emerging-market equities will rise faster than developed-country stocks and that Templeton is buying shares in
Russia.
The nation’s benchmark RTS Index has jumped 75 percent this year, the second-best performing market worldwide after
Peru.
Hedge Fund Bets
While the “longer-term trend is up” for emerging-market stocks, they may suffer a “correction” of as much as 20 percent in part because some hedge funds are selling shares in a bet they will decline, Mobius said.
“There has to be corrections along the way, that is the nature of the beast,” the 72-year-old investor said.
“We continue to try to be as fully invested as possible in these markets.”
Commodities will gain and the dollar will weaken in the “longer term,” Mobius said. The
Reuters/Jefferies CRB index has climbed 11 percent this year, rebounding from a 36 percent tumble in 2008. The
dollar slid 2.2 percent against a basket of six major currencies this year.
Mobius said he may be investing in Iraq in a year and is looking to invest in Iran. :party:
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