Emerging Markets Will Outperform After Covid, Longtime Investors Mark Mobius Say…

Peripatetic investor Mark Mobius, 84, sees a strong global economic recovery that should finally help emerging markets outperform after a decade lagging behind developed markets, and despite U.S. tensions with China.

Mobius, once described as the Indiana Jones of emerging markets, launched Mobius Capital Partners almost three years ago after retiring from a multidecade career at

Franklin Templeton,

where he ran one of the first emerging market funds. His new firm, which oversees $220 million in assets, takes a more concentrated approach to the frontier and emerging markets he has long invested in, focusing on roughly 30 companies and actively working to improve environmental, social, and corporate governance, or ESG, factors, and culture.

Barron’s caught up with Mobius in Dubai to see how he’s positioned for a global economic recovery, why he isn’t worried about a U.S.-China decoupling, and why he thinks central bankers’ fixation with inflation is misguided. An edited version of our conversation follows.

Barron’s: Emerging markets have lagged behind the S&P 500 index for about a decade. Why is this their year to outperform?

Mark Mobius: We’ve had a big run [in emerging market stocks], and this will continue. With the average age [of people] in these countries lower than that of the developed markets, their recovery [from Covid-19] will be faster. The vaccine, of course, helps, but more important is the psychology. As people begin to feel safe, you’ll see economic activity pick up very fast.

Technology is also hitting these markets, especially frontier markets, and that’s driving a lot of this move toward better asset quality and information. The currency is also getting stronger in emerging markets against the dollar, which itself is a positive. But more importantly, the psychology of a currency revaluation is very powerful for investors. The first question that [emerging market] investors often ask is if they will lose money on the currency.

India is the biggest country weighting in your portfolio. Why?

India just announced its budget and a number of dramatic changes that are going to have a big impact driving economic growth there—including opening up the insurance market to foreign investors and increasing privatization of state-owned enterprises. It’s a great story. We own

APL Apollo Tubes

[ticker: APAT.India], which makes steel pipes and [should benefit from] spending on infrastructure. We also own

Persistent Systems

[PSYS.India], a software company that does a lot of work with companies like

IBM,

and

Metropolis Healthcare

[METROHL.India], which does medical testing.