Mark Mobius, the veteran emerging markets investor, has embarked on a buying spree of undervalued stocks, convinced that some companies are poised to rebound from market lows prompted by the onset of the Covid-19 pandemic.
Mobius, who left Franklin Templeton after more than 30 years in 2018 to set up Mobius Capital Partners, also called on global lockdowns to end, to help fuel economic recovery.
Despite one of the worst routs to hit global markets since the financial crisis, the 83-year-old investor said there were already signs to suggest buying opportunities.
“Indices around the world have not been much different to what we’ve seen in history,” Mobius told Financial News. “If you look at bear markets since 1987, you find the average decline is about 50%, and the average length of time from the peak to the bottom is a little less than three years.
“It looks like we may be nearing the end of this one, as we’ve had a bounce from the bottom.”
Mobius pointed to the the MSCI Brazil, Turkey and India indices, which are down between 24% and 49% since the start of the year.
“These numbers are not as bad as the overall long term average,” said Mobius. “We may have to wait a little longer to see if we have hit the bottom. But when people ask me if this is the time to buy, my thinking is: if you see bargains, then you should be buying.
“A lot of other people are doing that, which is why we have seen a bounce from the bottom.”
He added: “We may have already hit the bottom. The difference this time is the massive bail out programmes that are feeding money into the market. Whenever you see a massive flow of cash coming into the market, equities will adjust.”
Mobius, who is unable to buy emerging market stocks for his personal portfolio as this would pose a conflict of interest with investments made on behalf of his clients, said he was increasing his personal investment exposure to healthcare and pharmaceutical companies, as well as those focused on luxury brands such as LVMH.
“All of these are down, but they are not going to stay down. I’m doing it gradually,” he said.
The comments from Mobius echo those of other heavyweight investors who have indicated that buying opportunities are starting to emerge amid the coronavirus crisis.
According to a recent survey of more than 200 investors conducted by Procensus, almost 50% said they were analysing potential entry points into markets, despite most expecting a short and sharp global recession to follow the coronavirus crisis.
Strategists at JPMorgan also indicated last week that some risk assets, including stocks and credit, had probably hit their lowest levels.
“Most risky markets have probably made their lows for this recession,” said the JPMorgan strategists, excluding oil and some emerging market currencies which have debt and sustainability issues.
“Most risky markets should trade higher in Q2 and investors should average into oversold markets, particularly those that central banks are buying directly.”
However, Mobius said a full economic recovery was being thwarted by government-imposed lockdowns.
Steps taken by the Federal Reserve and the Bank of England to lower interest rates would have little impact if people were unable to leave their homes and spend money, he added.
“The best thing governments can do is relax lockdowns and replace with programmes of social distancing,” said Mobius. “The real cost of this shutdown in human lives could be more than expected. A lot of hospitals are not doing critical operations simply because they want to leave hospitals empty to deal with the coronavirus.”
Mobius claimed that lockdown measures put in place globally have been based on “erroneous projections” — pointing to influential research carried out by Imperial College London, which initially estimated that coronavirus could cause 500,000 deaths in the UK, if left uncontrolled.
The number of deaths was later revised, with the epidemiologist who led the research predicting deaths were “unlikely to exceed 20,000 and could be much lower”.
Mobius said: “The way for a recovery is to lighten up on the lockdown, but take all the necessary precautions.”
At the weekend US president Donald Trump, who previously indicated that coronavirus-related restrictions could be lifted by Easter, bowed to pressure to extend these until at least 30 April.
The move came amid comments from Dr Anthony Fauci, the US government’s infectious disease expert, suggesting that the US could record more than 100,000 deaths from coronavirus.
This article originally appeared on Financial News.
