Mobius likes SE Asia; Myanmar one for the future

•  Indonesia, Thailand, ‘high up on list’; Vietnam looks cheap
•  Bottom-up manager favours oil and coal stocks, consumer firms
•  Says can buy indirectly in Myanmar-related companies

BANGKOK (Reuters): Emerging market stocks in Southeast Asia, notably in Indonesia, Thailand and Vietnam, will be good bets this year, Franklin Templeton’s Mark Mobius said, adding that while Myanmar looks interesting, this may not the best time to invest there.

Mobius, executive chairman of Templeton Emerging Markets Group, overseeing more than $40 billion of assets for US asset manager Franklin Resources, told Reuters he expected emerging markets to recover from last year’s setback.

He sees incredible growth potential in Myanmar, which has opened up fast since a civilian government took office last March and began political and economic reform.

“Myanmar is where Thailand was in 1970 probably. They’ve got a lot of ingredients that could lead to very high growth,” Mobius, 75, a veteran among emerging market investors, told Reuters in an interview, although problems with its banking system, currency and land ownership had to be straightened out.

“We can go in now in a sense that we can buy, indirectly, Myanmar-related or Myanmar-exposed companies, but directly, I’d say two or three years probably,” Mobius said.

Asked if he had already been buying, he replied: “Not yet...There’s a few in Singapore that have exposure but we will look. Usually what happens in cases like this is everybody rushes in and pushes the price up so it gets too expensive...We don’t have to be the first.”

Mobius, who joined Templeton in 1987, is also picking Vietnam, even if there are a lot of problems with the currency. “The reality is that the country is on a growth path. And the valuation is very attractive.”

According to Thomson Reuters StarMine, Vietnam is trading at 9.4 times earnings, cheaper than the 15.9 in Malaysia, Singapore’s 10 times and Thailand’s 12.4.

“Currently, our largest global exposure includes Indonesia, as well as China, Brazil, India, Thailand, Russia, and Turkey,” he said, emphasising its selections are based on attractive valuations for a number of companies there.

So far this year, the MSCI Southeast Asia Index has risen 7.6 per cent, while MSCI Asia ex-Japan has added 9.9 per cent and the MSCI All-World index 5.7 per cent.

Energy, consumer key picks

“The two sectors that are very important for us -- one is energy, because energy demand globally is going up. That means oil and coal primarily. The second one is consumer, because consumer spending power is rising globally.” “When you get into the smaller countries, Thailand is right up there. In fact, we have 10 per centof our total emerging market money in Thailand. We’ve got about $4 billion invested in Thailand, just in our emerging market group. And if you look further, Indonesia is high up on the list,” Mobius said.

Mobius said he was a firm believer in the Thai market even though prices have gone higher. Fast-growing China and India will continue to do well this year, and smaller frontier markets such as Sri Lanka, Pakistan and Bangladesh are showing potential, he said.

The risks to investments in these regions are a higher degree of volatility and the possibility of inflation speeding once again, he said.

“One risk we also see is high inflation. Although inflation was relatively low in many emerging countries, in some cases it rose during 2011,” he said. His $21 billion Templeton Emerging Markets Fund has returned about 12 per cent over the past month compared with the MSCI emerging stock index’s 10.5 per cent gain.