Emerging markets should show high economic growth rates in 2015, with China and India leading the way, according to
Franklin Templeton's Mark Mobius.
The chairman of Templeton's emerging markets funds believes developing world markets should "comfortably" beat established ones in the new year.
"Most are looking to rebalance economic activity away from export- and investment-heavy models to become more oriented toward consumer demand," he wrote in a 2015 investment outlook for clients.
Among the emerging markets, Mobius explained that China, India, Indonesia, Mexico and South Korea in particular have embarked on reforms aimed at eliminating bureaucratic obstacles, helping entrepreneurs and taming inefficient industries.
"The reform measures have had some short-term costs, but we believe that, should governments succeed in driving them through, longer-term benefits could soon begin to feed into economic growth figures," he wrote.
"The emphasis on market discipline could also create a closer correspondence between emerging-market growth and corporate profitability."
Mobius asserted that Templeton is especially enthusiastic about the potential for Internet and mobile technologies to help developing nations potentially leapfrog generations of economic change in more mature markets.
He noted that he is not disregarding the "market-unfriendly policies" recently pursued by Russia, Brazil and China in being optimistic on emerging markets, but predicted that both Russia and Brazil "have the resources to bounce back strongly should more appropriate policies be adopted."
"Chinese maritime assertiveness should be placed in the context of other foreign policy moves such as the 'Silk Road' initiatives aimed at improving relations and building trade with neighboring countries," Mobius stated.
"Even after recent rallies in some emerging markets, they continued to appear relatively attractive to us in relation to history, particularly if very low bond yields and interest rates for savers are taken into account."
Some argue that the continued collapse in oil prices is causing mounting damage in emerging market equities.
"The weakness in oil is depressing appetite for risk and emerging-market assets," Michael Wang, a strategist at Amiya Capital in London, told
Bloomberg. "It has taken many by surprise.
"There is an expectation in the market that the oil price could correct further as inventories remain high. There could be further pressure on emerging markets from weaker commodity prices and a stronger dollar," Wang noted.
Investors pulled more money from emerging markets in 2014 than they put in, and the pace accelerated at the end of the year,
Barron's reported.
Global emerging-market funds as a whole saw outflows of $23 billion, a 2.6% decline in assets for 2014, compared with outflows of $15.9 billion in 2013.
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