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Mobius Rules Out Chavez-Style Policy in Egypt as Stocks Soar

March 12, 2012

Mark Mobius, executive chairman of Templeton Asset Management's Emerging Markets Group. Photographer: David Rochkind/Bloomberg

Mark Mobius, executive chairman of Templeton Asset Management's Emerging Markets Group. Photographer: David Rochkind/Bloomberg

Islamist parties that have taken control of Egypt’s parliament are unlikely to follow in the footsteps of leaders like Venezuelan President Hugo Chavez by seizing private assets, Mark Mobius said.

Concerns, particularly in the U.S., that an Islamist-led government in Egypt may alienate foreign investors are unwarranted, said Mobius, who oversees more than $50 billion in emerging-markets (EEM) assets as executive chairman of Templeton Emerging Markets Group. Egypt’s benchmark stock index has surged 44 percent and is the world’s best-performing measure this year, data compiled by Bloomberg show.

“What we have to be careful about is a growth of extreme nationalism,” he said in an interview on March 8 in Dubai. “As soon as there is a sign of that then the game is over like what happened in Venezuela. We were completely out of Venezuela as soon as Chavez came in because we knew that assets will be confiscated. But I don’t see that happening in Egypt.”

The Freedom and Justice Party and the Nour Party, two Islamist groups that won about 70 percent of seats in parliament in the first elections after last year’s uprising, have said they would encourage foreign investment. Chavez, who took office in 1999, has taken over assets in the energy, metals, cement and telecommunications industries. Trading volumes on Venezuela’s main stock gauge plunged from 4.96 billion shares in 1999 to 11.2 million last year, and foreign direct investment fell in four out of the last five years, according to data compiled by Bloomberg.

‘Not Expensive’

Venezuela’s benchmark stock measure rallied 38 percent this year, trailing Egypt’s EGX 30 Index. (EGX30) The surge left the 30 companies listed on the Egyptian measure trading at 7.9 times estimated earnings compared with 10.7 times for the MSCI Emerging Markets (EEM) Index.

“Stocks are not expensive so therefore there is an opportunity to continue to hold at least and then with corrections on the way there will be opportunities to buy,” Mobius said, referring to shares in the North African country.

Orascom Telecom Holding SAE (ORTE), a mobile-phone operator in Egypt, has surged 147 percent this year. The shares are trading at three times estimated earnings.

“People have begun to differentiate after the initial turmoil, so you have seen heavily weighted stocks in the index like Orascom Telecom go up,” Mobius said.

Managed Float

The stock gauge plunged 49 percent last year, the worst since 2008, after a popular uprising ended the three-decade rule of President Hosni Mubarak in February. Foreign investors also dumped government debt securities, pushing yields to record highs. Net official reserves tumbled about $20 billion to $15.7 billion in February from the end of 2010, central bank data show.

The Egyptian pound, subject to a managed float, has weakened 3.8 percent against the dollar since the end of 2010. Mobius said there was a “good chance” for the pound to extend its decline, saying it would be a “mistake” for Egyptian authorities to “overly control the currency.”

“A weak currency is not a bad thing because it increases tourism and increases exports, etc, etc, which is what they need so I am not too alarmed by that,” he said. “As you know a good company that’s earning money and adjusting to inflation will make money with a depreciating currency.”

To contact the reporters on this story: Alaa Shahine in Dubai at asalha@bloomberg.net; Zahra Hankir in Dubai at zhankir@bloomberg.net

To contact the editor responsible for this story: Claudia Maedler at cmaedler@bloomberg.net


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