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3 Investment Secrets on Emerging Markets
Perspective | 25 August 2014
By: Jonathan Khoh
Articles (26) Profile

Are you invested in emerging markets or is contemplating on doing so because of the weak economic growth in Singapore?

Therefore, who else should you receive advice from other than Mark Mobius, the Dean of Emerging Markets.

This article holds key to the 3 investment secrets for investing in emerging markets formulated by the Dean himself.

Widely known as the “Dean of Emerging Markets” Mobius is regarded by many in the financial industry as one of the most successful emerging markets investor over the last 20 years.

Mark Mobius is the executive chairman of Templeton Emerging Markets Group, a subsidiary of Franklin Templeton Investment. Mobius was handpicked by global investing pioneer, billionaire and philanthropist Sir John Templeton to oversee the first emerging market fund listed on the NYSE in 1987.

The fund started with an initial capital of US$100 million and has since grown to a business worth more than US$50 billion and has generated a return of 2071.5 percent  or 14.7 percent annually since its inception. (1989 – 2011)

#Secret  1:     Trouble Is Opportunity

Sir John Templeton once said, “ If you want to have a better performance than the crowd, you must do things differently from the crowd”. Like his mentor, Mobius has aimed to uncover unusual places and unlock hidden value particularly in emerging markets where typical investors hardly ever invest.

On the same note, a supplementary advice Templeton left him was that “ Markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria.

The time of maximum pessimism is the best time to buy and the time of maximum optimism is the best time to sell.” Therefore, Mobius has always advised to think for the long term, focusing on the fundamentals and to think independently as the investment world has a herd mentality.

Mobius has also warned that investors shouldn’t be too macro focused, as it holds the dangers of becoming biased towards a specific region. In fact he likes troubled economies that are in financial or political distress because they spell opportunity.

#Secret 2:    Fundamental Rules For Investing In Emerging Markets 

Mobius has developed four fundamental rules for investing in emerging markets- fair, efficient, liquid and transparent.(FELT)

  • By “Fair” Mobius means that one must make sure that prospective emerging markets treat its investor both big and small equally.
  • By “Efficient” Mobius mean determining whether the stock exchange and local brokers are honest and friendly to investors and charge them at competitive and acceptable rates.
  • By “Liquidity” and “Transparent” Mobius means that investors are able to buy and sell the orders and be able to exit position in the downward market and these stocks will be characterized by accounting and financial transparency.

#Secret 3:    Diversification

On October 19, 1987 what many would remember as Black Monday. Earlier that year the Templeton Emerging market fund started out, Mobius started to load up on stock positions in Hong Kong, Singapore, Malaysia, Mexico and Philippines.

However, on that faithful Monday, his investment positions were down by a third. This was a real wake up call and he has since learnt the truth of the old adage “Never put all your eggs in one basket”.

Ever since, he has limited his investment portfolio in any particular region or country and even has limited their exposure in any particular sector within that particular country or region.

He adheres to a 5-40 rule, which mean that the sum of their position with over five percent allocation must be less than 40 percent of the overall portfolio. He also limits every country’s exposure to less than 30 percent.

Driven by passion in investments, Jonathan’s research emphasizes in incorporating critical thinking with value and income investing surrounding companies listed in Singapore. Well trained in banking and finance, Jonathan has intern experience at various industry players including GIC Pte Ltd.

Please click here for more information about this author.

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