By Luciana Magalhaes
SÃO PAULO -- Emerging markets guru Mark Mobius foresees increased volatility in global markets over the coming months, possibly with a weakening U.S. dollar and likely higher commodity prices, following the unexpected election of Republican candidate Donald Trump as America's next president.
The executive chairman of Templeton Emerging Markets Group, who manages about $28 billion in assets, however, says that there is probably an exaggerated pessimism with Mr. Trump's victory. He said the U.S. economy could be aided by Trump policies over the next four years, providing a boost to other economies along the way.
Still, uncertainty is likely to dominate global markets for months, causing asset prices swings over the next year, Mr. Mobius said.
"[Mr. Trump's] policies will be much more pragmatic and much more oriented to solutions that will benefit the U.S.," Mr. Mobius said in an interview with The Wall Street Journal. "If Trump is able to pull off a revival of the U.S. economy and growth, that of course will affect the entire world," he added.
Currently about 60% of the money managed by Mr. Mobius is in Asia, 20% in Latin America and the rest in other countries, including East Europe.
Mr. Trump has repeatedly accused China of being an unfair trading partner, and threatened tariffs on its goods. Still, Mr. Mobius says he is comfortable with his exposure to Asian markets and has no plans to dump holdings there.
Mr. Mobius believes that with Mr. Trump at the helm, the international relations between the U.S. and emerging markets will tend to become "more focused and realistic" and the presidentwill probably favor bilateral commercial agreements over multilateral ones, with more flexibility and reciprocity.
He believes global investors in emerging markets will likely keep their money in those countries or even increase investments until the U.S. situation becomes more clear.
The executive chairman of Templeton said Brazil may benefit from increased capital flows to emerging markets if the country continues with economic reforms. He said Russia may also gain with an improved relationship with the U.S., he added, if Mr. Trump pushes to lift sanctions imposed on Russia following its 2014 annexation of the Ukrainian territory of Crimea.
While markets and voters were taken by surprise by the result of the U.S. presidential election, Mr. Mobius says he was prepared for such an outcome because of the tight race between the Mr. Trump and his Democrat challenger, Hillary Clinton. Mr. Mobius said many polls didn't fully capturethe dissatisfaction of Americans living in economically depressed rural areas and the U.S. Rust Belt.
"As you know, the U.S. economy is not doing very well [there]; Fed policies have not worked. I think there is need for change," Mr. Mobius said.
Under Mr. Trump, the U.S. may correct some of its imbalances, according to Mr. Mobius. In his view, needed changes include cutting bureaucracy, lowering taxes and increasing interest rates.
Write to Luciana Magalhaes at Luciana.Magalhaes@wsj.com
(END) Dow Jones Newswires
November 09, 2016 12:07 ET (17:07 GMT)
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