India, US seeing fund inflows after China crackdown - Mark Mobius

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India, US seeing fund inflows after China crackdown - Mark Mobius
Mark Mobius of Mobius Capital Partners believes that the diversification of funds from China to markets like India and the US could be a short-term development but he personally was ‘heavily focused’ on the Indian market. Courtesy: Reuters

Investment guru is bullish about India stating that the “scope is wide, with lots of opportunities,” even as Softbank presses the pause button on Chinese investments.

With Beijing’s tightening its grip on the country’s major firms, thanks to a series of regulatory clampdowns, global investors have renewed their focus on other markets, thanks to the loss of billions of dollars. In the light of these developments veteran investor Mark Mobius has asserted that India and the US were now markets of choice even if for the short term.

Speaking to Reuters, Mobius, emerging markets fund manager and founder of Mobius Capital Partners, stated, "I would say half the money has just left ... But I think that is temporary, it will not last."

Mobius added that his firm was "heavily concentrated in India", with about a 20% allocation, adding that he was bullish on sectors ranging from medical testing to industrial equipment. "It's a pretty wide scope that we have in India. Lots of opportunities."

Chinese regulatory action has subsequently hammered valuations, underscoring SoftBank's China risk even as the group seeks to reduce dependence on its largest asset, a stake in Chinese e-commerce giant Alibaba Group. The shift has cast a chill on SoftBank's investing in China, which makes up about a quarter of its funds' portfolio.

It is believed that the effects of China's crackdown will be temporary, and over the long-term, curb monopolistic trends enabling small- and medium-sized enterprises (SME) to thrive, said Mobius, whose firm manages over $414 million in assets. Mobius earlier made his name as an emerging markets guru with US money manager Franklin Templeton, where he managed over $50 billion in EM portfolios.

SoftBank Group Corp. Chairman and Chief Executive Officer Masayoshi Son has paused investments in China as the government clampdown against the country’s tech firms plays itself out.
SoftBank Group Corp. Chairman and Chief Executive Officer Masayoshi Son has paused investments in China as the government clampdown against the country’s tech firms plays itself out.Courtesy: Getty Images

Lack of short-term appeal?

The unpredictability of China's regulatory measures makes the country unappealing to foreign investors in the short term but could make it attractive in the long run.

Mobius is not alone when voicing these sentiments. Softbank Group Corp’s chief executive Masayoshi Son has also paused investments in China as the government clampdown against the country’s tech firms plays itself out. "Until the situation is clearer, we want to wait and see," Son said. "In a year or two I believe new rules will create a new situation."

When the Japanese conglomerate posted record annual profit in May executives pointed to further upside from Vision Fund investments such as Chinese ride-hailing firm Didi Global Inc and "Uber for trucks" startup Full Truck Alliance Co Ltd.

Those companies listed in New York, but Chinese regulatory action has subsequently hammered valuations, underscoring SoftBank's China risk even as the group seeks to reduce dependence on its largest asset, a stake in Chinese e-commerce giant Alibaba Group Holding Ltd.

The shift has cast a chill on SoftBank's investing in China, which makes up about a quarter of its funds' portfolio.

While the crackdown has affected returns expectations, "our broader thesis in China is unchanged: It's still a large, growing and compelling economic opportunity," said Navneet Govil, the chief financial officer of Vision Fund.

So far more than $1.2 trillion in market value have been wiped off the market amid fears about the future of innovation in the world's second largest economy. Son said he was concerned about the the impact regulations would have on stock markets.

- Reuters

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