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Mobius says correction was expected

Templeton Asset Management chief executive Dr. Mark Mobius says the recent market correction should have been expected after four years with literally no interruptions.

Mobius believes that while a 9 per cent drop in China’s Shanghai and Shenzhen “A” share market triggered widespread selling on a global scale, people should not forget that a similar correction happened in May and June of last year, only for markets to rebound and reach new heights.

He says: “The correction in Chinas A stock market has come amid uncertainty ahead of the annual National Peoples Congress meeting in March and record high valuations. In fact, A shares are currently trading at a P/E of 44x, approximately four times the valuations of HK stocks.

“The A shares have nearly doubled in the last seven months, making them more vulnerable to declines and volatility. After the fall on 27th February, A shares rebounded nearly 4 per cent on the 28th. Asian and European markets, however, recorded further declines of 1 to 3 per cent.”

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