Mark Mobius, executive chairman of Templeton Emerging Markets Group, remains optimistic about emerging markets. If US growth remains strong, that will benefit exporters to the US. But even if the US disappoints, emerging markets have tended to grow by around 4% a year over the long run. Longer term, emerging markets have also made big strides in reducing corruption.
Mobius thinks consumer-facing stocks are the best way to benefit. Fast-food outlets, for example, are making their first appearance in countries such as Vietnam. Meanwhile, the need for substantial investment in infrastructure should also be good for firms in the construction sector. One big downside risk is a rise in American protectionism.
However, Mobius thinks this fear has been overdone. Already the US president, Donald Trump, has signalled that he is more interested in getting foreign countries to invest more in the US, something they can't do if they are being hit with tariffs. In any case, even a protectionist administration won't want to risk politically isolating the US by starting a trade war with Asian countries. Vietnam, for example, controls key shipping lanes in the South China Sea.
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Mobius expects emerging stocks to make gains of up to 40% in the next year. He's especially bullish on Indonesia. Its stockmarket is continuing to climb in the face of terrorist attacks, and economic growth and investment are strong at a provincial level. Another country that could do well in the short term is Pakistan. It was recently upgraded from frontier to emerging market by index provider MSCI, and should benefit from Chinese investment.
