Exclusive | Mark Mobius, ‘father of emerging markets’, says it’s time to buy small Chinese stocks as market reaches bottom
- ‘We are probably reaching the bottom or near the bottom and the market is probably going to recover’, Mobius says
- Investors should resist the temptation of using index funds – ones that invest according to the weightings of an index – to return to the market, he warns
“Obviously, the Chinese government wants the market to perform better. We are probably reaching the bottom or near the bottom and the market is probably going to recover,” Mobius said in an exclusive interview with the South China Morning Post.
The MSCI China Index, which tracks 738 stocks, fell 14 per cent in the first quarter, adding to a 21.6 per cent slump in 2021.
Mobius was one of the early birds to invest in developing economies in Asia and mainland China.
Mobius is still bullish about China and other emerging markets.
“Do not buy the index, but buy individual stocks,” he said. He believes big tech companies, which dominate the major indices that track Chinese stocks, will be subject to further tightening of regulations.
“These big boys were basically dominating so many fields,” said Mobius. “It’s a good idea to look at the medium and small companies, because they are going to be benefiting from government policies to create a more level playing field.
“It is a good idea to choose those mid-size companies that have a good return on capital, and most importantly, do not have a lot of debt.”
“The traditional measure of inflation, which is the CPI, the Consumer Price Index, is quite inaccurate and flawed and not a good guide. But unfortunately, central banks around the world continue to use that measure and act upon it,” he said.
“It’s not surprising that when you have a big increase in money supply, the value of the money declines and prices go up. And they call it inflation. But actually, it’s really devaluation of the currency.”