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Last Updated : Oct 16, 2020 03:58 PM IST | Source: Moneycontrol.com

Mark Mobius says markets could have a 'dramatic fall' if US election outcome is contested

According to Mobius, the fall will depend on how long the dispute lasts.

If the upcoming US Presidential Election ends in a contested outcome, this could cause a dramatic fall in the stock markets, veteran investor Mark Mobius warned on October 16.

A contested outcome is likely if a candidate deemed to have lost the election refuses to concede, or if he questions the legitimacy of the results.

Sitting President Donald Trump has repeatedly declined to say whether he would accept the election results, which gave rise to concerns of a messy transition of power if he loses to Democratic presidential candidate Joe Biden, a CNBC report said.

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Speaking to CNBC in an interview, founding partner of Capital Partners Mobius said, “If that takes place, then we’re really in trouble. The markets will not like it and you’ll see a real correction or maybe a dramatic fall in the market. So that’s a very, very big problem,”

According to Mobius, the fall will depend on how long the dispute lasts. He explained that if it is taken to the Supreme Court, the process of determining a winner could be “drawn out” and create more uncertainty.

This would be something that markets “hate.”

What is the Mobius method to counter-act this? 

Hedging against the risk of a contested outcome, Mobius has invested in companies that are somewhat immune to economic downturns. This, according to him, means businesses with strong balance sheets and those that can maintain or increase demand for their products and services.

On US-China relations, Mobius said he is not too worried about it. “In this day and age, countries, regardless of any trade restrictions etc., they still have to trade. And this will be true of the US and China,” he said.

As an expert on emerging markets, Mobius maintained that Asia remains a bright spot for investors, and mentioned that he had been investing “pretty heavily” in Taiwan and South Korea, particularly in companies that supply the “nuts and bolts” of technology — such as semiconductors and integrated circuits.

According to him, the demand for such parts will continue to grow along with greater adaption of technology.
First Published on Oct 16, 2020 03:51 pm
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