Mobius on World index fund

Mark Mobius in his recent interview compared the results of Emergings funds to the MSCI World index fund (uk:iwrd), a common benchmark for 'world' or 'global' stock funds. Mobius: “The MSCI World Index has climbed 54 percent from a 13-year low on March 9 as more than $2 trillion in government spending worldwide boosted demand.”

You can see on the above chart that the Emergings index (EEM) has out performed the World index by about 40% during this brief time. The World index includes a collection of stocks of all the developed markets in the world covering 23 countries, but excludes stocks from emerging economies.

Aug. 10 (Bloomberg) — Mark Mobius said global stocks will drop as much as 30 percent after advancing from multiyear lows and as companies increase share sales. “When you have these rapid increases, almost without correction, you will definitely have a correction at some point, so we can expect a lot of volatility,” the executive chairman of Templeton Asset Management Ltd. said in an interview in Kuala Lumpur today.

“Increases of 70 percent will be followed by decreases of 20 to 30 percent.” The MSCI World Index has climbed 54 percent from a 13-year low on March 9 as more than $2 trillion in government spending worldwide boosted demand. The rebound prompted a revival in share sales.

China State Construction Engineering Corp. and Visa Inc.’s Brazilian affiliate VisaNet raised about $11.9 billion in the world’s largest initial public offerings this year. The biggest risk for global stocks is the increase in initial share sales and bond issues, Mobius said today. Investors will be “selling to take up new stocks, that will impact the prices,” he said.

Mobius, who oversees about $25 billion, on July 29 said he plans to double Templeton Asset Management’s emerging-market assets within two years. The so-called correction “can happen anytime, probably this year,” Mobius said. “It may not be all at once, you may not see a decrease of 20 percent suddenly, it could be 10 percent here, and a rise of 5 percent then another 10 percent, you’ll see this kind of volatility in the markets.”

He added that he was referring to shares “globally.” This year’s rally has driven valuations of stocks on the MSCI World Index to 24 times earnings, more than double the 9.2 multiple on Nov. 20. China Shares China’s Shanghai Composite Index, the world’s best- performing major market, has surged 78 percent this year, as banks tripled new loans to 7.37 trillion Yuan in the first half to support a 4 trillion Yuan government stimulus package. “I don’t think it’s a bubble,” Mobius said. “I’m not worried about it,” as the government’s policies to rein in bank lending are a “good thing.”