'Money supply, derivatives will continue to boost equities'

WORLD CAPITAL MARKETS SYMPOSIUM TEMPLETON executive chairman Dr Mark Mobius, who correctly predicted the current bull run back in March, said surging money supply in the system and the use of derivatives will continue to drive stock prices up.

He said global investors, who had retreated to holding US Treasuries last year in October and November thinking that those were the safe haven investments, are now seeking to diversify their portfolio as the pessimism on global economy fades. "So you are going to see a big push into equity going forward," said Mobius, who oversees US$23 billion (US$1 = RM3.50) as of June this year.

"We are in the bull market now, no doubt, but there will be corrections." He said Templeton is bullish on consumer and commodities shares. He also likes China and Brazil markets.

Templeton Asset Management Ltd is the Singapore-based subsidiary of Franklin Templeton. Mobius also manages the US$1.07 billion Templeton Emerging Markets Fund and heads a team of over 26 emerging market analysts worldwide.

Templeton is a value investor and has an average five-year holding period for stocks. Investors can still find cheap shares in emerging markets, he said, although they may have missed the best buying chance at the end of last year when sentiment was at its most pessimistic. Emerging market shares will continue to outperform the US and global stocks, Mobius said.

There is a "good chance" that a big market correction is on the way after the recent rally, where share prices may fall 10 to 20 per cent from the current levels, Mobius said.Still, more money are being supplied into the system by governments' printing presses, including the US, and when banks start to lend again.

The additional money supply will find its way into the stock markets, he pointed out. Share prices will be further boosted by the use of derivatives, even after the most established institutions in the world had chalked up billions of losses in the financial crisis as a result of the wrong way betting on the speculative instruments.