EDITOR'S NOTE: Famed investor Mark Mobius’ opinions on hedging against the Russia-Ukraine war may likely rub many Americans the wrong way, but it does speak truth to mainstream assumptions about the strength of the US. What Mobius suggests is essentially an anti-dollar and anti-US index position. The first has to do with gold, and the second speaks to the value of Chinese assets versus American ones (mainly because the former has the least exposure). Now, bear in mind that what’s being presented here isn’t a recommendation. Instead, it presents information to help you get an objective outlook on the state of the US economy and to do so from a particular expert’s perspective. Why the yellow metal and Chinese assets and not the dollar and American indices? How much exposure might constitute adequate diversification? Is his fundamental rationale sound, or is it exaggerated? Read on and decide for yourself.
- Mark Mobius touted gold, Chinese equities, and other Asian stocks as good investments during current market uncertainty.
- China is likely to be in a good position as it isn't exposed to the situation in Europe, Mobius told Bloomberg Thursday.
- Other Asian countries including Thailand, Vietnam, and Taiwan are potential safe havens, he said.
Famed investor Mark Mobius suggested adding Chinese and emerging market stocks to the list of traditional safe havens for investors looking to find more stable investments as Russia's spiraling conflict with Ukraine adds uncertainty to financial markets.
Vladimir Putin launched a full-scale attack on Ukraine Thursday, a move that made equity markets sell-off across the board. Eastern European stocks were hit particularly hard, down well in excess of 10% in the aftermath of the attack in some cases.
In times of intense uncertainty like Russia's invasion, the reaction in markets is to pile into safe-haven assets at the expense of those that carry higher risk. Mobius said investments in China are particularly safe compared to those in the Western nations that have imposed sanctions on Russia.
"China will probably be in a fairly good position, given the fact that they are not exposed to the situation in Europe so much," he told Bloomberg in an interview Thursday.
"I think China is going to be a safe haven, because they're going to continue to produce, they'll continue to grow," he said, adding that the economy is expected to cut interest rates.
Mobius, who has previously recommended portfolios should hold 10% in gold, reiterated support for the yellow metal.
"I think (gold) is going to continue to go higher in view of the situation," he said, referring to a backdrop of soaring inflation and the rise of cryptocurrencies.
"With all the cryptocurrencies, we're seeing an incredible avalanche of currencies around the world," he said. "And of course, that means devaluation of currencies, and that means, inflation and higher commodity prices."
was last down 1.4% at $1,898 an ounce, but is up nearly 3% in the last month.
Mobius also touched on soaring oil prices due to geopolitical tensions, saying this would add inflationary pressure for a number of countries reliant on Russia for oil. But he pointed out that some countries like India are dependent on other sources of energy, such as coal.
"We found that in fact, the oil price alone is not really going to kill these markets and countries like Brazil, of course, producing their own oil," he said. "So it's a very mixed picture."
Other Asian countries including Thailand, Vietnam, Malaysia, Indonesia, the Philippines, Taiwan, and Korea are also potentially insulated from the Russia-Ukraine conflict, according to him. Still, he cautioned the outlook across markets appears very mixed.
"It's going to be very important for people to be stock picking, being very careful given the fact that interest rates are going up."