Ringgit ‘grossly undervalued’

Warm greeting: Securities Commission chairman Datuk Ranjit Ajit Singh and Mobius at the conference.

Mobius says Malaysian foreign reserves at a good level, public debt manageable

KUALA LUMPUR: The ringgit, which has fallen by more than 15% against the US dollar since January last year, has made Malaysia very attractive, says Mark Mobius.

Mobius, executive chairman of Templeton Emerging Markets Group, also noted that the country’s economic growth has been very good.

He said although foreign reserves have come down, it was still at a good level while the public debt level was manageable.

“It (ringgit) is 28% undervalued, which is why we have been buying local stocks,” Mobius said.

He said this at the Securities Commission’s inaugural Global Emerging Markets Programme Conference.

He said things in Malaysia were cheap due to the depreciation of the ringgit, reinforcing his positive stance on Malaysia at this stage.

Mobius also pointed out that emerging markets (EM) were at a “turning point”, with funds expected to flow back into EMs.

He said fund managers were “underweight” on EMs but these markets were now at a turning point and prices could jump rapidly.

Mobius said EMs were in “very good shape” now.

However, he said not all EMs were the same and not all companies within these markets were the same.

Mobius said Malaysia was one of his favourite emerging markets, apart from Brazil and Vietnam.

Over the past two decades, he said the MSCI Emerging Markets Index tends to have a short bear market running at an average of 14 months, compared with bull markets that last longer at an average 69 months.

The losses during the bear markets averaged 57%, against the average gains of 358% during bull markets, he added.

Mobius said China was still an enormous economy although it was now decelerating. He added China’ services sectors were now powering the economy.

He said the US markets have peaked and may go either sideways or down, providing good news to the EMs.

Furthermore, he said that the Federal Reserve’s hesitation in raising interest rates would see money in search of better opportunities and yields.

Commenting on commodity prices, Mobius said they would eventually bounce back, while the current rout presented many opportunities, like consolidation of companies that traded in commodities.

“I think we have seen the bottoming in commodity prices,” Mobius said.

As an example, he said a shipping company relying on the oil and gas industry might look like loss-making because of revaluation loss from its vessels.

However he added the firm still had strong cash flow from operations.

“So when oil price recovers, the company should be doing well,” he said.