The growth of obscure and opaque financial instruments and operations has increased after 2008, therefore our world is not better prepared to stop the contagion of a new crisis, says Dr. Mark Mobius, Executive Chairman of Templeton Emerging Markets, at Franklin Templeton Investments, adding that only through transparency in the operations and balance sheets of the major global banks we can reduce risk.
The renowned investor is optimistic regarding Greece, but states that in order the country to see meaningful investment inflows, foreign investors must have comfort that not only Greek rules will be in place, but that EU rules will also prevail.
Dr. Mark Mobius interview by Konstantinos Mariolis
Do you see another global crisis coming? After 2008 are we better prepared to stop contagion?
Unfortunately, despite the 2008 crisis we are no better prepared to stop contagion simply because the financial worlds has become more integrated and the growth of obscure and opaque financial instruments and operations has increased. There is no transparency in the operations and balance sheets of the major global banks. Only through good transparency can we expect to reduce risk. A good example is the recent crisis surrounding Deutsche Bank: does anyone know the real value of all the derivatives in their balance sheet?
Last year you said that Greece will remain in the Eurozone and that the turmoil regarding the negotiations with international creditors create a buying opportunity. Almost 16 months later what do you think for Greek banks, the Greek stocks in general and the prospects for the Greek economy?
I am generally optimistic regarding Greece because I believe that the Greek people, and Greek body politic have undergone a change in thinking and behavior which will create a more solid fiscal and regulatory base for growth in the coming years. I do think that the worst is over as regards to constraints on the economy, and now there is a good chance for a more optimistic outlook. We are forecasting growth next year for Greece, the budget deficit is narrowing, unemployment is declining and most important, tourist arrivals were doing very well this summer, with over 3.3 million in July.
You have also said that state asset sales are key to the implementation of reforms in Greece needed to overcome the crisis. What are the conditions for global investors to invest in Greece?
The key is a clear long-term set of rules so foreign investors are certain that any agreement with the government they make today will be long-lasting, so that they can make appropriate plans and make long-term investments. The fact that Greece remains in the EU means that foreign investors have comfort that not only Greek rules will be in place, but that EU rules will also prevail.
Do you agree with those stating that the “Italian problem” is bigger than BREXIT and why?
I don't think that it is bigger than BREXIT because the implications of BREXIT impact the entire EU in some very fundamental ways, which go beyond only financial matters. In addition, we must remember that the ”Italian problem” Is not only Italian, but universal; bad loan books can be found all over the world and government bailouts of banks are common internationally.
Do you believe that BREXIT creates opportunities for other financial centers to emerge as global hubs or London will retain its status?
Absolutely. There are now great opportunities in the lower income countries in Europe to take advantage of the exit from the UK. Greece should try to take advantage of this development by offering advantageous schemes to attract finance related firms.
What are the main medium term risks that investors should focus on? How will the US presidential election affect stock markets?
The main risks I call the three “I's”: Interest Rates, Inflation, Integration. The risks of continued unrealistic interest rates going into negative territory contains many risks that money finds its way into unviable projects and businesses with consequences of defaults further down the road. Inflation could rise markedly if central banks decide to purchase non-bond assets directly such as stocks which the Bank of Japan is doing. Integration of trade and investment being denigrated with a global move towards isolationism is another large risk.
You are one of the most respected international investors. Could you name the emerging markets that will benefit the most from the current environment?
Actually all emerging markets are benefitting from the current environment because of the inflows of money in search of yield. The Asian markets are particularly important – China and India – but any other countries that have reasonable growth prospects will be benefitting.
