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The star investor Mark Mobius believes that investors will have to adjust much more this year than an imminent trade war and a collapse of emerging market equities. This is only the preliminary step, warns the expert.
Franklin Templeton's long-time fund manager, Mark Mobius, has been skeptical of the stock market developments in recent weeks and months. However, given the current events, the emerging markets expert now gives an even clearer warning: that of a global financial crisis.
"The worst is yet to come"
The situation in the trade dispute between the United States and China is threatening to escalate. The President of the United States Donald Trump on Wednesday presented a list of $ 200 billion worth of other goods from China that can be punished with punitive tariffs of 10%. The Chinese are threatening retaliation. If the new tariffs become reality, half of all US imports from China would be affected by special charges – a supergrader for the Chinese economy and many companies based in that country. Mark Mobius, a specialist in emerging markets, expects an additional 10% drop in emerging market equities. And worse, it will lead to a global financial crisis, said Mobius in an interview with "Bloomberg". The trade war is only the preliminary stage, warns the expert.
Dependence on cheap money
"There is no doubt that sooner or later we will be facing a financial crisis because we have to remember that we come from a period of time. cheap money, "explained the expert. Many emerging market companies depend on cheap money to maintain their business. For them, there will be a "real pressure".
The liquidity tightening policy of the US Federal Reserve and the European Central Bank has already hit emerging markets, with the strong dollar doing the rest. Added to this is the trade dispute between the United States and China which, according to Mobius, is likely to worsen. For the MSCI Emerging Markets Index, the expert predicts a further 10% decline by the end of the year – with an overall expected decline of 16% overall of the year then a bear market.
Expert also sees investment opportunities
However, despite his warnings, Mobius also sees buying opportunities in the current market situation. Potential winner of a trade war, the emerging markets expert has identified sectors in six countries: the industrial sector in India, the technology sector in South Korea, the agricultural producers in Brazil, the soybean in Argentina , shoes in Vietnam and clothing in Bangladesh.
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