- Trump is interested in having a bilateral relationship with Mexico
- In Latin America he also likes Brazil and Argentina
- Both the Mexican market and currency should go higher, they like gold, as well as the consumer and energy sectors
In his latest visit to Mexico, Mark Mobius, Executive Chairman Templeton Emerging Markets Group, discussed President Trump, the dollar, Emerging Markets, and why he believes Mexico is a good investment.
The man who wrote the book in emerging-market investing, that is celebrating his 30-year anniversary with Templeton Emerging Markets Group this month, says that above all, Donald Trump is a negotiator and as such, he is aware that in any deal both parties should benefit in order to considerate it a success, so is not worried about what will happen to Mexico with a Trump administration.
In his opinion, the US President is using twitter as a smokescreen and manipulating the media. Mobius says Trump is interested in having a bilateral relationship with Mexico, and other countries, but multilateral agreements like NAFTA will be pushed aside. “Trump was the only candidate to flew down to mexico” he recalls before pointing out that “higher economic growth in the US will be good for everybody, including Mexico… and once Americans feel economic security the anti-immigration sentiment will decrease.” Mobius also expects the dollar to devaluate in order to boost exports.
The EM specialist believes that the recovery in emerging markets will continue aided by cheap valuations – vs US, Japan and Europe, improving sentiment – since people are realizing they are underweight in EM, Technology and favorable demographics.
In Latin America he likes Brazil, Argentina and Mexico. Speaking of Mexico, Mobius said that the country looks great. According to him, the rising inflation is offset by faster rising wages “so the consumer is going to be spending -and maybe faster- as a result of inflation.” Meanwhile, he believes the peso, from a purchasing power perspective is 15-20% undervalued so, after another dip -mandated by market sentiment, it should appreciate.
“Mexico has been bombed out, the currency and the market have been hit and everybody expects the worst to come but the reality on the ground is quite different… The recovery could be very surprising to a lot of people. We expect a big jump in the Mexican market” He points out. The sectors Mobius and his team like in Mexico are consumption and those with regards to gold. They currently do not hold positions in any tech firms.
Another area of opportunity he identifies is the Energy sector. While in most countries Energy and Utilities represent an important part of the index, Mexico’s energy participation in the market is still incipient and Mobius expects the US and Mexico to work together in energy related sectors, like oil field equipment. “This could be very big.” He concludes.