I was born in New York to a German father and Puerto Rican mother, but I gave up US citizenship some years back. Traveling to some places with a US passport was a problem, and of course there was US tax.
“I think any delay in the IPO is because they are still trying to confront these issues. The investment bankers want the fees, but we the investors get to ask the important questions,” he added.
At the moment, Mobius is
“Emerging markets are still attractive. There was a long period of underperformance against US markets, but this ended in 2016 so we’ve had nearly two years of (EM) bull markets. These bull markets tend to run for between five and market. South Korea is looking to get into the developed market category,” he added.
The EM universe got a shot in the arm at the turn of the century when the BRICs concept emerged as an investment category, focusing on the growth potential of Brazil, Russia, India and China. (South Africa was added later as a political concession.)
“I think the BRICs was a very sound concept at the time. The idea of grouping together countries that were very different, but which also had some basic economic characteristics in common. It’s still a good investment concept, but maybe they should stick to the four original countries, without South Africa. In general, it’s time to think about the EMs in a new way, to think of them as growth markets rather than emerging markets.”
Mobius then gave a global tour of investment prospects. “Some 20 percent of what we own is in China and by far our biggest fund is the Asia fund. India comes after that and then Thailand. Vietnam is a potential one for EM market status, but at the moment we include it in the frontier markets category. Malaysia is good at the moment too. Japan is in Asia, of course, but we do not regard that as an emerging market. It has already emerged. Africa is very interesting. Ten of the fastest-growing economies in the world are in Africa, from a low base of course,” he said.
Political considerations come into play in the investment world. “We would love to be in Iran, it’s such a big potential market, and in Russia too, but sanctions will not allow. We are in Russia to some degree, but it’s restricted by sanctions. I used to sit on the board of Lukoil and found it a very good company,” he said.
With so much riding on China, it is natural that this is one of his top priorities.
“Where does the Chinese growth story stop? When they get too big of course. Growth has slowed down. In 2010 the economy in China was growing at a rate of 10 percent, in
2017 it’s around 6 percent, but of course it’s much bigger in dollar terms.
“The ‘One Belt, One Road’ program is a policy to help sustain higher growth, but it also has political and military aspects too. I’ve just got back from Sri Lanka, where there is big Chinese investment across all sectors,” he said.
Does he regard the global investment scene as threatened by increasing rivalry between the US and China, which some analysts have forecast will inevitably turn into a military confrontation? “There is already a military angle to the US-China relationship. The situation in North Korea is very interesting, and has clear implications for China. There is a debate going on there between the old timers who want to carry on supporting North Korea, and the others who are worried that conflict there would bring the US into Asia in a big way,” he said.
“The forthcoming 18th Communist Party congress in China will be very interesting, and I think President Xi Jinping will do something very profound there,” he added.
Exactly what he thinks that will be, he is not inclined to say, but instead he maps out a reading list that he believes will explain the modern world and the US-China rivalry. The titles are not reassuring for world peace: “Treasury’s War,” “My Journey to the Nuclear Brink,” and “The Hundred-Year Marathon.”
The latter title, Mobius explained, was inspired by a comment from the founder of communist China, Mao Zedong. “Mao said in the 1950s that the race against America was a 100-year marathon. Well, we’re more than half way through the race, and China has nearly caught up,” he said.
The Mobius world view is derived from decades of travel and experience of having lived through some of the more turbulent times in global markets. He still rates the Asian financial crisis of 1997 as the most severe he has experienced. “All the big Asian economies seemed to be going down the drain. The big question for investors then, and it remains a central question today, was: Can you get your money out?” he said.
When we met, he had just come from South Africa, and was on his way to Singapore, clocking up a few more miles on a schedule that logs thousands every year. Where does he call home?
“I was born in New York to a German father and Puerto Rican mother, but I gave up US citizenship some years back. Traveling to some places with a US passport was a problem, and of course there was US tax,” he explained.
“I’m a German citizen, though I live in South Africa, Dubai and Singapore. Hong Kong is my tax base, and I have property there too. But Singapore is where I hang my hat,” he said.
Then he went back to books, talking about the two cartoon publications that have been produced about his life and work, before opening a copy of his own 2012 book “Passport to Profits” and inscribing a dedication on the fly page.
One author he will probably not be recommending is the recent Nobel prize winner for economics, Richard Thaler. “I think the economists are behind the curve. He won the prize because he hit on the idea that peoples’ emotions determine how they invest,” said Mobius. “That’s not exactly new, is it? Where have they been?”