Mobius bets on further oil price increases

Wednesday, 21 March 2012 00:03 - - {{hitsCtrl.values.hits}}

Reuters: Franklin Templeton funds that focus on developing economies are heavily invested in energy stocks as the firm believes oil prices have room to increase further, the head of its emerging markets group Mark Mobius said on Tuesday.

“If you look at inflation and the oil price over the long term, you’ll find that the oil prices have not kept up with inflation, so there’s some catch-up to do,” Mobius told a news conference.

So long as oil does not spike rapidly from current levels of around $120 a barrel, the impact on the global economy will be manageable as slower growth among oil importing countries will be offset by gains in Russia and other oil producers, he added.

Franklin Templeton, whose emerging markets group manages about $50 billion in equity, counts several oil companies among its top holdings.

Its flagship $17 billion Templeton Asian Growth Fund, which was 36 percent invested in energy as of end-January, has PetroChina Co and Thailand’s PTT as its first- and third-largest holding.

The global emerging markets fund owns Lukoil Holdings and Gazprom and Mobius told reporters Templeton funds also have stakes in Singapore rig builder Keppel Corp.

Fund managers and analysts from Franklin Templeton’s emerging markets group are currently in Singapore to discuss the firm’s investment plans in coming months.

Mobius said the firm also sees opportunities in Africa and other so-called frontier markets that are not only rich in natural resources but also have fast-growing middle classes.

“These countries are at a very early stage of development,” said Mobius. For instance, although Africa represents 17 percent of the world’s population, it only accounts for six percent of global GDP.

Nine out of the world’s 10 fastest growing countries over the last decade were frontier markets, six of them in Africa, he added.

Mobius’ Templeton Frontier Markets Fund, which has just under $1.2 billion, is heavily invested in banks and telecommunications, with energy ranking third by industry sector. Nigeria represents the fund’s largest holding by country.

Frontier markets refer to countries such as Kazakhstan and Vietnam and the newly emerging economies in Africa and the Middle East, which currently receive very little investments through the stock markets.

Mobius said avenues to invest in these markets had grown in recent years and he was confident of deploying capital efficiently even if the size of his frontier fund had rapidly tripled to more than $3 billion.

As for China, he said he was confident about its continued prospects despite signs of slowing economic growth and worries among some investors that the world’s second-largest economy is headed for a hard landing.

“People ask me if China is going to have a hard or soft landing. I tell them China is not landing, they are going to continue flying,” he said.