The Federal Reserve’s move to reduce interest rates by 50 basis points is welcomed news for emerging markets, according to Mark Mobius, an emerging markets fund manager and founder of Mobius Capital Partners LLP.
In an interview with CNBC, he noted that markets had anticipated the Fed’s decision, as reflected in the Thai Baht‘s surge by approximately 9% in recent months, along with the appreciation of other emerging market currencies.
Decreased interest rates in the US generally lead to increased capital inflows into higher-yielding emerging markets, offering investors the opportunity to pursue better returns.
In addition, the stock markets in emerging markets (EM) have shown better performance than the United States market, notably in Taiwan and India, with expectations of further improvement in these EMs as capital inflows begin to return to these markets.
Apart from the relatively positive outlook on the Indian market, Mark Mobius suggested that there are still significant investment opportunities in countries such as Taiwan, Thailand, Indonesia, and South Korea, which have demonstrated relatively good development in recent times.
Countries with a high foreign currency-denominated debt, such as Mexico, Brazil, Africa, and Turkey, are expected to benefit from the Fed’s interest rate cuts as well.
Mobius emphasized that the majority of investment capital is currently in the United States market, and if investors in the US see better returns elsewhere, a considerable amount of capital will flow into those markets. At present, he holds a highly positive outlook on markets other than the US.
