Return of the Bull?

Written by Chua Kong Ho & Michael Patterson / Bloomberg News

Wednesday, 25 March 2009 00:16

Templeton Asset Management Ltd.’s Mark Mobius said the next “bull-market” rally in developing-nation equities has begun as stocks surged from Shanghai to São Paulo on the US Treasury’s plan to revive the banking system. On Monday the MSCI Emerging Markets Index climbed the most this year, erasing losses for 2009, on US plans to buy as much as $1 trillion of toxic assets. China’s Shanghai Composite Index rose for a sixth day, the longest winning stretch in more than 17 months, as the government encouraged mergers in the auto and steel industries. Russia’s Micex jumped to the highest since October after Citigroup Inc. said the stocks are “dirt cheap,” while banks led Brazil’s Bovespa index to a 5.1-percent gain. “You have to be careful not to miss the opportunity,” Mobius, who helps oversee about $20 billion of emerging-market assets as executive chairman at San Mateo, California-based Templeton, said in an interview with Bloomberg Television recently. “With all the negative news, there is a tendency to hold back.” The 72-year-sold investor, voted among the “Top Ten Money Managers of the 20th Century” by the Carson Group, said there are bargains in every emerging market after the MSCI benchmark fell 57 percent from its October 2007 peak. Equity valuations tumbled as a collapse in US consumer spending shrank demand for manufactured goods and commodities, while frozen bond markets curbed developing-nation companies’ access to credit. Templeton is looking for companies that are “cash-rich,” have low debt and high dividend yields, or those that can invest for future growth yet have cash left to pay shareholders, Mobius said. He cited Hong Kong’s Denway Motors Ltd., PTT Plc. in Thailand, Indonesia’s Bank Central Asia, ICICI Bank Ltd. in India, Taiwan Semiconductor Manufacturing Co. and Dairy Farm International Holdings Ltd. in Singapore. The MSCI Emerging Markets Index climbed 4.8 percent to 579.31 for the biggest advance since December 8. The rally sent the gauge up 2 percent for the year, the first 2009 gain since January 9. The benchmark for equities in 23 developing nations tumbled 54 percent in 2008 and lost as much as 16 percent this year on concern a global economic contraction would erode earnings. A TRADER looks up at a monitor while working on the floor of the New York Stock Exchange on Monday. Stocks climbed around the world as investors speculated the Obama administration’s plan to rid banks of toxic assets will spur growth and investor Mark Mobius said a new bull market has begun. BLOOMBERG NEWS The gauge has rallied 16 percent in March, headed for the biggest monthly gain since December 1993, on speculation China’s 4 trillion-yuan ($586 billion) stimulus package will boost demand for commodities and as the biggest US banks said they were profitable in January and February following $1.2 trillion in writedowns worldwide. The Obama administration’s plan is aimed at financing as much as $1 trillion in purchases of illiquid real-estate assets, using $75 billion to $100 billion of the Treasury’s remaining bank-rescue funds. The Public-Private Investment Program will also rely on Federal Reserve financing and Federal Deposit Insurance Corp. debt guarantees, the Treasury said on Monday. Fifteen of the 17 major equity benchmarks that increased this year are in emerging markets, according to data compiled by Bloomberg. China’s Shanghai Composite Index jumped 25 percent on forecasts infrastructure spending will keep economic growth near the government’s target of 8 percent. The Micex rose 37 percent, and shares in Brazil and Chile climbed more than 7 percent as prices for oil, iron ore and copper rebounded after the worst drop in the Reuters/Jefferies CRB Index on record last year. Shares in the US, western Europe and Japan jumped, pushing the MSCI World Index of stocks in developed countries to a 5.1-percent gain. The gauge is still down 9.8 percent in 2009. Financial shares in emerging markets surged 5.8 percent as a group to the highest level in two months. Itau climbed the most since January 12, helping send Brazil’s Bovespa index to a 5.9 percent gain. Erste Group Bank AG rose 15 percent, leading gains in the Czech Republic’s PX Index. Bank Pekao SA added 4 percent as Poland’s WIG20 index advanced 2.9 percent. Russia’s Micex index rallied 7.3 percent, the top gain among emerging markets worldwide, as oil climbed to the highest in almost four months and Citigroup strategist Andrew Howell raised his rating on the country’s stocks to “overweight,” meaning investors should hold more of the shares than are represented in benchmark indexes. Howell cited “dirt cheap” valuations and this year’s rally in oil for the upgrade. Citigroup analysts Markus Rosgen and Elaine Chu are among strategists who said recent Asian stock gains are a temporary “bear-market rally” because valuations have yet to plumb the lows seen in past recessions. Tal Eloya of Fidelity Investments, the world’s biggest mutual fund company, said he’s skeptical of predictions about the timing of the market cycle. “No one can call the bottom in the stock market,” Eloya, a portfolio manager at Fidelity, said in a briefing in Seoul. “You are going to see a lot of bouncing off the bottom because there’s a tremendous amount of uncertainty in the market,” Mobius said. “But I have a feeling we’re at the bottom and now we’re building a base for the next bull market.” IN PHOTO -- MARK MOBIUS, executive chairman of Templeton Asset Management Ltd., poses for a portrait in Hong Kong, China, on Monday. “Stocks are building a base for the next bull market,” Mobius said, who helps oversee about $20 billion of emerging-market assets at Templeton Asset Management Ltd. The firm is finding “bargains” in every emerging market, which are in “better shape” than developed economies. SCOTT EELLS/BLOOMBERG NEWS