EMs will go on outperforming; average growth at 5%: Mobius

The end of quantitative easing would not as a big a problem as the US government deciding to take money off the table, believes Mark Mobius of Templeton Emerging Markets Group.

“If they (US government) decide to take money off the table, in other words, reduce the amount of money in circulation, then that would be a problem for everybody because there won’t be enough money to move into equities, bonds and other investments around the world. I doubt it would happen though,” he told CNBC-TV18.
Earlier in the week, US Federal Reserve Chairman Ben Bernanke said that the US economy is yet to fully recover from the impact of the global financial crisis. He said that more regulatory action was needed to ensure the stability of the financial markets. However, he warned that as these procedures were put in place new risks might emerge.
US Treasury debt prices rose on Tuesday, pushing benchmark yields below 2% for the first time in over four weeks as worries about the pace of global economic growth bolstered demand for safe-haven US government debt. Benchmark yields were still being impacted by March US jobs growth that came in well below expectations last week, casting doubt over the strength of the US economic recovery.
According to Mobius, Bernanke has got his foot on the peddle and wants to make sure unemployment comes down. “That’s true of other countries as well--the Europeans, Japanese, the Chinese--they all still want to see good growth, although they are cautious about inflation,” he believed.
Meanwhile, economic growth across emerging markets was the fastest in three quarters in the first three months of this year as manufacturing rebounded and the services sector accelerated although growth in China slowed, a survey showed on Thursday.
HSBC's emerging markets index (EMI), based on 21 service and manufacturing sector purchasing managers' surveys in 16 emerging economies, rose to 53.4 in the first quarter of this year. That was up from 52.4 in the fourth quarter of 2011 and further above the 50 mark that signals growth in activity.
Mobius believes emerging market may continue to outperform their developed peers going forward. “I think we are in pretty good shape,” he reiterated.
Emerging market manufacturers reported an increase in output for the first time in three quarters, but China posted its sharpest decline in production for three quarters, weighing on the sector.
Mobius says China may not reach the 7.5% growth target it has setout for itself. Rather, he believes it may be more than that. “They (China) are having difficulty slowing down the economy. I think emerging markets are going to grow at average of 5%. So, we are getting pretty fast growth in emerging markes and earnings are going to come through as a result of that,” he said.