As fuel and food prices spiral ever higher, Malaysian bonds are attracting a record amount of foreign investment from investors such as Franklin Templeton (manager of the $10 billion Templeton Global Bond Fund), Pacific Investment Management and State Street Global Advisors, sending the ringgit to its highest level in a decade. Meanwhile, a different kind of fund with the name Templeton in it is getting hot and heavy for this year’s worst-performing currency. Time to place your bets.
South Korea's won, the world's worst performing major currency this year, is undervalued by about 8 percent and the nation's stocks should outperform, said Mark Mobius, who manages emerging-market shares at Templeton Asset Management Ltd.
"Korean stocks are cheaper than the average emerging markets," Mobius said at briefing in Seoul today. "The currency is somewhat undervalued."
The benchmark Kospi index fell 3.9 percent this year to trade at 13 times estimated earnings, compared with a multiple of 15 for the MSCI Asia Pacific Index. South Korea's won has dropped 12 percent in 2008 while five-year government bond yields have fallen almost half a percentage point. The central bank yesterday said it plans to lower its growth forecast and signaled it wants a weaker currency to help boost exports.
President Lee Myung Bak, who won a landslide victory on Dec. 19, wants to boost economic growth to 7 percent and double per capita income to $40,000 by 2017. He pledged in February to cut taxes and speed up deregulation in South Korea, which was forced to seek a bailout from the International Monetary Fund in the 1997-98 Asian financial crisis.
"Since 1997, Korea has actually outperformed emerging markets in general and I think that is going to continue, especially as a result of the kind of reforms that the government is instituting now," Mobius said.
Templeton prefers materials, chemicals and capital goods- related stocks in South Korea, and likes GS Holdings Corp., which operates unlisted GS Caltex, the nation's second-largest oil refiner, Mobius said.
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