'Father of emerging markets' Mark Mobius turns bullish on China stock as property measures restore confidence

Legendary emerging markets fund manager Mark Mobius has reversed his view on Chinese stocks as he believes the country's recent property support measures will restore investors' confidence. A recent trip to the southern part of the country also helped change his mind.

The 87-year-old fund manager, who as recently as last month said China equities "were not attractive" in a Bloomberg interview, indicated on Thursday that his view had changed.

Mobius said he was not yet "super-bull" on China but that the country's stocks were "beginning to look good now."

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"China's stock markets went too low, and people were overly pessimistic. When you invest, you do not want to step in front of a high-speed train coming at you so you step aside and let the train pass," he said.

"When the market reaches the bottom, then you can begin to invest. Now, the Chinese market has reached the bottom and is beginning to deliver the recovery after all the government measures to support the real estate market. We have seen light at the end of the tunnel."

Mobius was speaking at a media briefing on Thursday to unveil plans to launch a new US$1 billion fund in September that could invest in China and Hong Kong stocks as well those in India, Turkey, South Korea and Taiwan.

Shanghai, Guangzhou and Shenzhen - three of China's four tier-one cities - have this week separately launched historic stimulus measures to revive their housing markets. It came after the country's top authorities issued an ambitious rescue package for the sector earlier this month, which included a 300 billion yuan (US$41.4 billion) lending facility.

About 10 provincial cities including Nanjing, Tianjin, and Chengdu have recently adjusted their property policies with measures such as lowering down-payment ratios and offering subsidies on trade-in homes.

Mobius believes these measures will restore confidence, though the pain the property market has endured in recent years means mainland investors will be more inclined than previously to plough some of their money into stocks, rather than parking it all in real estate.

"Chinese tend to put too much of their wealth into property. They now will learn a lesson of 'don't put all your eggs in one basket' and they are better off diversifying their investment and putting their money in some good stocks," he said.

A recent trip to southern China had an impact on his thinking too.

"We drove around and we began to see the signs of recovery. The most impressive thing about China today is the incredible infrastructure, high-speed trains, roads, bridges," he said. "It is amazing, and that is a very good foundation for growth in future."

Mobius, dubbed the "father of emerging markets," started investing in developing economies in the 1980s.

His new hedge fund, the Mobius Emerging Opportunities Fund, will be offered to global investors in September. It aims to raise up to US$1 billion from sophisticated investors, with a minimum investment of US$500,000.

Mobius and his team will use artificial intelligence tools to look through the financial statements of listed companies in China, Hong Kong, Taiwan, Turkey, India and South Korea to choose 30 stocks which make good use of technology to achieve growth.

He will be looking for companies with good returns on capital, low debts and good management. Mobius said mainland companies with good international brand names and exposure, such as certain electric-car makers or well-known tech companies.

Mobius said companies listed in Hong Kong and Shanghai could be considered.

"Hong Kong is a great gateway to China, and it is an international market. We find many good Hong Kong companies worth investing in," he said. "Shanghai has a deeper exposure in China, but Hong Kong has a special place because the companies in Hong Kong have expanded globally."

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2024 South China Morning Post Publishers Ltd. All rights reserved.

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