Templeton Asset Management favours Asian energy stocks and has placed a big bet on fast growing but politically volatile Pakistan, the firm's top emerging markets fund manager, Mark Mobius, said on Thursday.
Templeton expects oil prices to stay around $100 a barrel, helped by its soaring demand in China and India, which will shore up earnings at companies such as Petrochina and India's Oil & Natural Gas Corp (ONGC). "The housing crisis is hitting the US market. There is an impact but what we found in the past is that oil consumption does not go down dramatically," said Mobius in a telephone interview with Reuters.
"The swing factor (for oil) is what is happening in China and India," said Mobius, who manages a total of $40 billion in emerging market assets, about half of which is invested in Asia. Mobius' Templeton Asian Growth Fund was 36 percent invested in energy at end-January, and its top holdings included Petrochina, China Petroleum & Chemicals (Sinopec), Korea's SK Energy and India's ONGC.
The $7.7 billion fund was 106 percent invested in equities as Templeton borrowed to meet redemptions last month rather than reduce its shareholdings, at a time of sliding global stock markets as investors worried about a spreading credit squeeze.
"The values were there and we thought there would be a recovery. It's advantageous for existing shareholders as we are not forced to sell down at unreasonable prices," he said. Asian stocks, excluding Japan, fell close to 20 percent at one stage in January, but are now down about 7 percent for the year.
Templeton said its funds can borrow up to 10 percent of their asset value to meet short-term redemptions, giving managers greater flexibility in managing their portfolio when markets are volatile. The Asian Growth Fund returned 36.7 percent in the past 12 months, beating a 22.4 percent rise in its benchmark, the firm said.
PAKISTAN'S PULL: In Pakistan, a market shunned by most institutional investors but which accounted for 5.3 percent of Templeton's Asian Growth Fund's portfolio, Mobius said the country's stocks were attractively priced at forward price-earnings ratios of less than 10.
Pakistan's stock market is Asia's top performer this year, up almost 10 percent on top of a 40 percent rise last year. Economic growth has averaged about 6 percent in the last five years, but Pakistan has been plagued by political instability and militant attacks. A Templeton spokesman said the firm's Pakistani investments included CB Bank, Oil & Gas Development Co, Faysal Bank and Pakistan Telecommunication.
"It's working out for us well," Mobius said, noting that recent elections had replaced an unpopular military-backed government with a civilian government that was likely to retain the previous administration's pro-private enterprise policies "We don't see any huge problem in terms of a big bear market continuing in Asia," Mobius said. "We think there will be a recovery."