The Organization for Economic Cooperation and Development (OECD) issued a negative economic outlook for the major industrialized economies, but noted that growth in emerging economies remains strong. Separately, emerging markets guru Mark Mobius told investors where specifically they could grab on to that growth.
Chief economist Pier Carlo Padoan likely surprised no one with the OECD’s assessment that “growth is turning out to be much slower than we thought three months ago, and the risk of hitting patches of negative growth going forward has gone up.” The Paris-based forum of democratic, market economies says that economic growth among G7 economies excluding Japan should remain at less than 1% in the second half of the year. On the bright side, “inflation may have peaked in emerging markets,” where the OECD suggests monetary authorities might usefully lower interest rates.
Meanwhile, Franklin-Templeton Chairman Mark Mobius, in an interview on Yahoo Finance’s Breakout, explained why the disparate growth trajectories of world economies matter. “There is a direct relationship between economic growth and the profitability of companies. The economic growth will be reflected in earnings of companies and then in turn reflected in the price of stocks.”
Mobius specified the countries he views as having the most favorable prospects currently. In Asia, he favors Thailand and Indonesia, two countries seeing expanded consumer markets. “The money that was concentrated in Bangkok and concentrated among the elite of that society is now being spread into the countryside,” he said. He added that authorities in Indonesia “are working very hard to wipe out the corruption throughout the countryside. That of course puts a lot more power into the hands of the lower-income population.”
In Europe, Mobius sees opportunity in Poland, Romania, Russia and Turkey. In contrast to the stagnation in Western Europe, Mobius says that Romania and Russia are accelerating reforms that should pay off over the next two to four years. In Latin America, Colombia and Chile are the most interesting countries today. Mobius is heavily in Brazil, which he says “has everything going for it” except for an overly valued real right now.