Investment guru Mark Mobius warns that oil prices are still headed to $100 and that it’s time for investors to start buying emerging-market stocks.
"At the end of the day, emerging markets equities look very cheap now. It's time to get in," the co-founder of Mobius Capital Partners told CNBC.
Problems in countries such as Turkey and Argentina, a strengthening U.S. dollar, and rising oil prices were factors behind a major sell-off in emerging markets assets in recent months, he said. However, some countries, such as Brazil, are already seeing a recovery in their currencies and stock prices, Mobius said.
Mobius said he focuses on companies in traditional industries — such as retail — that are using technology to improve their productivity, CNBC said. He also has a preference for firms with strong balance sheets, little debt, and those that split their cash reserves between investing for expansion and paying dividend to shareholders.
"Dividends are a sign that the company first has cash and also thinks about shareholders," he said.
Meanwhile, Mobius still thinks oil could hit $100 per barrel soon, but not by year's end, as he had predicted at one time.
CNBC cited Mobius as saying the good news is by the time oil touches $100 per barrel, currencies in emerging markets would have recovered enough against the U.S. dollar, so that price increase wouldn't hurt their finances so much, he explained.
Crude oil dropped to a low of $30 a barrel in January 2016. That forced OPEC to partner with non-OPEC countries, including Russia, to cut production to help prices rebound.
Benchmark Brent crude, which had been trading above $80 a barrel recently, now hovers just over $70 after the U.S. sanction waivers on Iran, the Associated Press reported.
Prices have been hurt by rising U.S. oil inventories and fear that trade wars could contribute to slower economic growth, which would reduce demand for energy.
Mobius isn't alone in touting emerging markets.
As trade tensions, a stronger dollar and interest-rate hikes take a toll on emerging markets, some of the world’s biggest money managers are pivoting to a familiar phrase: It’s all about value, Bloomberg explained last month.
Investors and strategists including BlackRock Inc., T. Rowe Price Group Inc., Goldman Sachs Group Inc. and Pacific Investment Management Co. say the pummeling that the asset class took this year means now’s the time to buy.
"EM equities are trading at close to the biggest discount to the U.S. on record, so there are a lot of investors ready to pounce," said Sonja Gibbs, a senior director at the Institute of International Finance in Washington. "Relative to mature markets, EM equities could well return more in dollar terms next year, given how far they’ve fallen and the extent of currency depreciation."
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