MARK MOBIUS: Betting on services and commodities despite local stock valuations getting high
Philippine stocks are getting “expensive” but there are still buying opportunities in selected sectors like services and commodities, according to emerging market investment guru Mark Mobius.
In a briefing in Manila on Monday, the executive chairman of Templeton Asset Management’s emerging markets group said he was upbeat on equities in emerging markets. “The key word is growth. If an economy is growing, the companies in that economy will have a better opportunity to grow.”
In the case of the Philippines, the visiting global fund manager said the domestic economy was still expected to expand this year although at a slower pace compared with last year’s. “We’d like to see the Philippines growing at the rate as China is,” Mobius said.
Mobius added that local stock valuations were now high compared with emerging market peers. But he pointed out that it was too early to say whether the Philippine Stock Exchange index—which was recently hitting record highs—would lose steam.
Given that the local market was driven by domestic liquidity and that there was still ample flow of overseas remittances, Mobius said it would be difficult to determine its peak. At the same time, he said the negative real interest rates in the country—referring to nominal interest less the inflation rate—were still conducive for yield-seeking investors.
Asked about opportunities, Mobius expressed optimism in two sectors, one of which is services, citing in particular fast-food retailer Jollibee Foods Corp. “Jollibee is not a cheap stock but that is the kind of stock we will be interested in,” Mobius said.
The renowned global fund manager is also upbeat on commodities.
“We believe in commodities, whether it is nickel, iron, ore and coal, that is where the Philippines’ potential is,” Mobius said. Given the incredible natural resources in this country, Mobius said it was odd that there were not too many of those big mining companies around.
Compared with emerging market peers, he said the Philippines was at the middle of the pack in terms of certain benchmarks like real interest rates on deposits, corporate governance based on the United Nation’s human development index, and degree of economic freedom.
On the other hand, he noted the country’s poor ranking in the ease of doing business as well as in corruption perception indices.
But he also noted that the Philippine stock market has outperformed the emerging market index in the last 12 months, three years or even over a five-year period.
Mobius said domestic money was primarily helping drive up the local stock market, noting that more foreign portfolio or “hot money” flow is going instead to fixed income and currency investments.