Mobius Says U.S. Slowdown Won't Last, Bargains Abound

By Cathy Chan

Sept. 23 (Bloomberg) -- The U.S. slowdown may be shorter than expected and private equity investors should start searching for bargains after valuations tumbled this year, said Mark Mobius, executive chairman of Templeton Asset Management Ltd.

``I just don't see a long, protracted recession,'' Mobius, who manages about $40 billion in emerging market stocks, told the Super Return Asia conference in Hong Kong today. ``There is an opportunity to buy low right now and sell high in the next cycle.''

Mobius said private equity investors with a five-year investment horizon should watch out for bargains, even in export- oriented industries, because world trade is still increasing. The economies of emerging countries including China, India and Russia should withstand the financial-market turmoil because they have resources to boost domestic spending, he said.

Private-equity firms raised a record $324.4 billion in the first half as investments in funds that buy distressed assets increased, according to a report from London-based Preqin Ltd. Announced leveraged buyouts dropped 73 percent in period to $143.1 billion though, according to data compiled by Bloomberg, after investors and banks cut off financing as credit market seized up.

Global stock markets whipsawed last week after Lehman Brothers Holdings Inc. filed for bankruptcy, Merrill Lynch & Co. sold itself to Bank of America Corp. and regulators pumped $85 billion into American International Group Inc. to bail out the world's biggest insurer. The MSCI World index slumped more than 7 percent by mid-week before rallying after central banks pumped money into the financial system.

U.S. Rescue Deal

U.S. regulators and lawmakers are working on a broader rescue that could cost more than $700 billion. In an interview with Bloomberg Television on Sept. 15, Mobius said the Merrill deal and the U.S. pledge not to bail out Lehman signaled financial markets were near the bottom.

Templeton's Emerging Markets Fund has lost 30 percent this year, in line with the drop in the MSCI Emerging Markets Index. Mobius said in the interview he's increasing stakes in emerging- market banks, and currently owns shares in financial companies in Brazil, Thailand, South Africa and Turkey, without naming them.

Others speakers at the Hong Kong conference said equity markets have further to fall.

``Investors shouldn't rush into the market as valuations are expected to come down further,'' Jean Eric Salata, chief executive officer of Baring Private Equity Asia, said at the conference. ``We haven't seen the worst of the downturn yet and the pace of investments will continue to slow because capital is very tight.''

To contact the reporter on this story: Cathy Chan in Hong Kong at Kchan14@bloomberg.net.