Mobius Says Latin America Stocks May Rise to Records (Bloomberg)

Feb. 16 (Bloomberg) -- Mark Mobius, chairman of Templeton Asset Management Ltd., said Latin American equity indexes will resume gains within a month and may climb to records this year.

Mobius is buying stocks in Brazil, Mexico, Peru and Colombia and plans to add Chilean stocks “at the right price,” he said today in a telephone interview from Santiago.

“Latin American markets are going to move up after the current correction because we are nowhere near the previous highs in most of these markets,” said Mobius, who manages $34 billion in emerging market assets. “Things are quite optimistic particularly in Brazil, and this will infect countries in all of Latin America.”

Benchmark stock indexes in the region can “definitely” climb to all-time highs this year, he said.

The MSCI EM Latin American Index has retreated 6.9 percent this year amid concern about China’s effort to curb lending and Greece’s ability to finance its debt. The index, which would need to climb 36 percent to surpass its record from May 2008, surged 98 percent last year, the most in almost two decades. It climbed 1 percent to 3,833.04 today.

Brazil’s Bovespa stock index would need to gain 12 percent to top its all-time high from May 2008. Brazilian markets are closed today for the Carnival holiday. Chile’s Ipsa Index climbed to a record earlier this month and Argentina’s Merval, Mexico’s Bolsa and Colombia’s IGBC index rose to all-time highs in January.

Market Correction

“We’re in a bull market, no question about that,” Mobius said. “But we’re in a situation where we need to have a correction in the market” because its advance was overdone given investor uncertainty about corporate earnings, he said. “Multiples in emerging markets have been stretched. They’re above the average for the last ten years in emerging markets.”

The MSCI Latin America index trades for 17.8 times the reported earnings of its companies, more than the 13.7 monthly average of the past decade, according to data compiled by Bloomberg.

“You could argue that there has been a pretty decent selloff,” said Nudgem Richyal, a fund manager at JO Hambro Capital Management Ltd. in London, which manages $4.5 billion in assets. “But given the kind of environment we’re in, I just prefer to sit on the sidelines still.”

Private Equity

Mobius said that Templeton is also considering private equity investments in small Latin American companies. So far the firm’s private equity investments have been focused on Asia and Russia, he said.

“We’re looking at small private or even small listed companies that may require a boost in capital,” Mobius said, without specifying the nations where Templeton is exploring potential investments.

Templeton’s private equity opportunities may increase due to the election of Sebastian Pinera, a Harvard University- educated economist, as president of Chile last month, Mobius said.

“Chile’s current government has done things extremely well, but what the country requires from the new government of Sebastian Pinera is a boost to small businesses and entrepreneurial business,” he said. “That would be very good for the economy and for capital markets.”