In a May update for the US market, Templeton Emerging Markets Group’s executive chairman told investors his biggest concern would be if there were a reversal of widespread privatisation in many emerging markets which has boosted productivity for over 25 years.
He said: "My top concern is if there is a move towards state intervention of private enterprises in the emerging markets.
"What we have seen over the years since we started in 1987, is the move away from state control, organisation and operation towards private sector organisation and operation. That has increased productivity. So, if there is a reversal of that, that would be a big concern."
The three main reasons for optimism on his asset class were levels of growth, foreign reserves and debt, he said.
Mobius said on average, emerging markets were looking at 5% growth compared with 1% on average for developed counties, which gave him confidence.
He also said foreign reserves were building up in these countries, and declining in many developed nations. The third reason for his optimism was relatively low levels of debt to GDP.
Mobius said easing monetary policy as seen in the US, Europe and Japan was further reason to to be bullish on equities, improving liquidity which was in turn good for equities.
"Because the money needs to find a home," he added.
Mobius cited the importance of dividends as an indicator of a company’s corporate governance.
"If a company is giving dividends to shareholders and still having enough left over to make the capital investments then it is very positive," he said.
On Eurozone fears, he said there was a chance of Greece or Portugal regressing to ’emerging’ status, and would consider companies in countries like these if the valuations stacked up.
"When we started the definition of an emerging market was the list of low and middle income countries as defined by the World Bank, in terms of per capita income," he said.
"In the case of Greece, and Portugal, they were both emerging, then they joined the EU and became richer and fell out. Now they may be coming back in again because Greece is in terrible economic straits and per capita incomes are coming down. So it is very likely that they will be added back in again."
But he said the final call was with the emerging market index purveyors, such as Standard & Poor’s and MSCI, as to whether they added or subtracted particular countries.
