At this stage China has more cheap stocks than India, but in long run prefer India to China : Mark Mobius

IMP-ost : 17th Sep, 2012 ( Post 5 of 7 )

Prefer India to China in the long-term: Mark Mobius, Templeton Emerging Markets Group

Source : ET 

In a chat with Punita Kumar Sinha, Founder & Managing Partner, Pacific Paradigm Advisors, Mark Mobius, Executive Chairman, Templeton Emerging Markets Group, talks about the macro-economic health of China and what it means for India. Excerpts:

Punita Kumar Sinha: For the long term investor, would you overweight India or China?

Mark Mobius: For the long term, probably India but again, it depends on the individual stocks. We are stock pickers and we want to buy cheap stocks. At this stage of the game, China has more cheap stocks than India because they have been issuing a lot of new paper, new shares but over the long term, probably India.

Punita Kumar Sinha: China's real GDP growth is at a decade low, other than the 2008 blip. Should this concern global investors?

Mark Mobius: No, not really because China is still growing at a very rapid rate for an economy of that size. We must remember, according to economists around the world, China is the second largest economy in the world and when you have an economy of that size, you cannot expect continuation of the double digit growth that they had during the past decade. But we can expect high and middle single digit growth, which is what we are looking at this year, probably about 7% growth and that is very healthy growth for economy of that size.

Punita Kumar Sinha: It appears that China's leadership is prepared to sacrifice growth at the expense of rebalancing the economy from being export oriented to consumer oriented but the data is showing that things have been cooled off too much. What do you think needs to be done to resume growth?

Mark Mobius: I believe that they still want high growth because they are worried about unemployment. You must remember China is producing lots of graduates from universities and schools that need jobs. So they have to ensure that these people find work and that means a fast growing economy.

But I believe that the shift from export orientation towards domestic consumption is a very healthy one and positive for the rest of the world because it means that China is going to become a bigger importer than it is right now. We have seen imports by China now taking up something like 9% of the world's imports whereas 10 years ago, it was about 2%. So this is a very very healthy development for everyone concerned. Now how are they doing this? They of course have to provide more and more wages, higher salaries and we have seen very rapid increases in wages in China. In many countries, we have seen maybe 3% or 4% or even no growth whereas in China, we are seeing 20% growth in many areas in wages. So they are definitely moving in the right direction.

There is a safety net problem with China as you know. They need better and lower cost hospitalisation, pension funds and all of these things that make people feel secure so that the money that they earn, they can spend. Nevertheless, the consumer market is growing at a very nice pace.