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Mobius says emerging markets will stay on the rollercoaster

Templeton emerging markets investment trust manager Dr Mark Mobius says emerging markets are set for more short-term volatility.

Despite a positive long-term outlook for emerging markets, Mobius gives a cautious forecast for the short term. He says: “We can expect more volatility in view of a prolonged major downturn in the US economy, rising global inflation, economic overheating in China and India and highly volatile exchange rates and commodity prices.”

China’s economy grew at 10.6 per cent in the first quarter of this year despite heavy snow storms and slower exp- ort growth. Inflationary pressures eased in May, with consumer prices growing by 7.7 per cent compared with April’s figure of 8.5 per cent due to lower food prices. Foreign direct investment in China rose by 55 per cent to £21.7bn in the first five months of the year.

Mobius says fears of the effects of a US recession coupled with overheating and inflationary concerns dragged the Asian markets into negative territory at the end of the second quarter.

Despite the rocky ride ahead, he points to recent corrections in global equity markets and remains positive on the longer-term outlook for well managed companies in emerging markets.

Mobius says: “These econ- omies continue to display relatively strong funda-mental characteristics and are expected to grow at a much faster rate than their developed counterparts.”

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