Benzinga - by Shanthi Rexaline, Benzinga Editor.
Emerging markets guru and fund manager Mark Mobius weighed in on the supportive measures China is mulling to prop up its economy, private companies, and the stock market.
China’s Tech Focus: “It appears that China wants to have more and more investment, but with a very, very specific goal, and that too in technology stocks,” said Mobius in an exclusive interview with Fox Business. The bulk of the $41 billion initial public offerings in China so far this year are of companies that are tech-oriented, he said.
“Xi Jinping wants to grow the tech sector and of course achieve the objective of having the tech sector in China surpass that of the U.S.,” the fund manager said. “So, they are going about investing in a very aggressive way.”
He also clarified that by techs, he also refers to electric vehicle companies, software, hardware, and every aspect of tech. But the emphasis is going to be on chips, he said, adding that the emphasis is going to be on chips as China strives to surpass what is happening in Taiwan with Taiwan Semiconductor Manufacturing Company Ltd. (NYSE:TSM).
Time To Pile Into Chinese Stocks? Mobius said, to some extent, investing in Chinese names was more comfortable now that the government appears to be relaxing its iron grip on publicly traded tech companies, adding that this was only with very specific companies.
“But the problem now is that you have companies that may not be very profitable at an early stage,” he said.
“It doesn’t mean these companies are not going to do very well in the next three to five years, but what I’m thinking is that we have to be very cautious about looking at these companies and making sure that we’re in companies that are going to be profitable and have a lot of ROE — return on earnings — coming in,” he said.
Don’t Desert China: While delving into multinational companies, including Apple, Inc. (NASDAQ:AAPL) diversifying away from China, Mobius said China is still a very important market that can’t be ignored. He recommended people diversify into India, but also hold Chinese stocks that are attractive.
On the impact emerging market leaders can have on investments and returns, Mobius said, “We look at it very, very closely to see to what degree the leader is going to support private enterprise.”
He lauded Indian Prime Minister Narendra Modi, who has demonstrated his commitment to supporting an opening of the Indian economy and enterprise. “Pushes towards private enterprise, free enterprise system, which is very beneficial for stock markets generally,” Mobius said.
China Recommendations: The billionaire said it is advisable to lighten up holdings on the consumer names as the Chinese government is unlikely to give support. But he favored Chinese tech names, but only those that are profitable now and that have a very good future going forward.
Waiting On The Sidelines: Mobius said he holds money in cash waiting for the market to correct substantially. “But we still are investing in India and other countries around the world,” he said.
The iShares MSCI Emerging Markets ETF (NYSE:EEM) fell 0.70% to $38.20 in premarket trading on Monday, according to Benzinga Pro data.
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