Mark Mobius, Executive Chairman of the Templeton Emerging Markets Group, speaks to Emma Wall, Web Editor for Morningstar.co.uk. To watch the video, click here. Below are excerpts from Mobius' conversation.
Thailand is a fast-growing country. They are now part of the ASEAN group, Association of Southeast Asian Nations, and will benefit from that. They are right there below China next to Myanmar and Laos and Cambodia. So it's a very, very interesting country and a fast-growing one that, I believe, looking forward will provide very good benefits.
One of the wonderful things happening is that there has been more distribution of wealth throughout the kingdom. You have a situation in the past where all the wealth was concentrated in Bangkok, the capital. Now, with the new political structure with Mr. Thaksin and now his sister coming into power, they have made an effort to get money out into the country side and that's been very good for the economy.
There is competition in manufacturing, in tourism, and so on and so forth, but Thailand can really meet the competition. The workforce is very intelligent, dedicated and hardworking. Tourism is booming. Many European tourists find their way to Thailand in addition to Asian tourists.
The problem going forward would be political, if there are severe disagreements between the so-called reds and the yellows. The yellows are more oriented towards the monarchy and towards the status quo, whereas the reds are more into reform and change. If there is continuing conflict between these groups, which sometimes can get violent, that could present a problem.
Russia has been having a very, very bad reputation in the press and people are generally negative on the country. That’s usually a good sign to think about looking at it, because when things are unpopular, you can often get good bargains, which is the case in Russia. The valuations of the Russian companies are very low and we think there are good opportunities there.
When we started in Russia, it was a mess. You had terrible infrastructure, you had nothing in the shops. They were just transitioning from a communist state to a capitalist state, basically what they are now. A lot has happened in a relatively short period of time. So you've got to give it time. We think going forward they will do quite well.
The third market pick is more difficult, because I think at the end of the day, commodity situation may change going forward, and I would say probably South Africa would be a place to look at. The news again has not been very good. Commodity prices have come down, in some cases not terribly low, but they have come down. Of course, there have been mining strikes in South Africa, but there are opportunities, I believe, in that market; not only because of the mining, but because of consumer stocks look quite interesting. These consumer companies in South Africa are moving North into the rest of Africa and that’s where the big growth is going to be.
The risk is turmoil in the labour market, because the labor unions, particularly in mining, have been very unhappy about what's happening with their wages. Costs are going up. The standard of living with some of these people is going down as a result of higher inflation. So I think that could be a big problem. However, if there is stronger reform, which could take place going forward as a result of elections, where some of the lower performing groups within ANC are pushed out – ANC, of course, is the ruling party – then you could see some rapid change.
