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Mobius: Hungary will not go the way of Greece

Franklin Templeton's emerging markets veteran Mark Mobius says fears that troubled Hungary is the next Greece are overdone and he is eyeing eastern European buying opportunities.

Last week some members of the ruling Fidesz party in Hungary shook investor confidence by touting the possibility of a sovereign default. On Monday, the coutry's finance minister dismissed the talk as a communication 'blunder' and said there was no need for austerity measures.

Mobius also thinks the Hungarian situation is not comparable to that of Greece.

'Hungary is not the next Greece,' Mobius said. 'The numbers are quite different. The ratio of public debt to GDP last year in Hungary was 80% unlike Greece's 133%. Also they recognised the problem and were working at it already. They have had the IMF deal in place for two years now to stop a full blown crisis.'

He does think debt fears will continue to weigh on markets, however.

'I think the focus on sovereign debt will be with us for a while and continue to put downward pressure on sentiment,' he said.

Mobius is currently underweight in eastern Europe for his globally-focused funds, but is looking at increasing exposure to the region.

'Some of the prices have come down to the point where they are looking interesting again. The region is spotty, but we like Poland. But Turkey is our top pick in emerging Europe, particularly some stocks from the banking and telecoms sector.'

The veteran fund manager, who runs a raft of funds including Templeton Asian Growth, thinks it strange that when there is a flight to safety the US dollar is still the first port of call, despite the government printing money there. But this attitude is slowly changing, he thinks, and emerging markets could become seen as a safe haven.

'People still have the idea that emerging markets are a risky place to be, but if you look at the credit default swap market, Russia is below Spain, Greece and Portugal. I think the process towards emerging markets being a safe haven has already begun, especially if they continue to build up reserves.

'Perceived risk in emerging markets is quite different from the actual risk.'

by Philip Haddon on Jun 07, 2010

Thursday, June 17th 2010
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