What is your view on the current situation?
Mark Mobius: Well, the situation is interesting. First of all, I have to congratulate India for the conclusion of this situation with Pakistan. But I think India has got to keep an eye on this situation and continue to prepare for a repeat of this kind of situation. So, I am glad to see that the Indian military is ready and able and it is important that they keep a very close eye out on the situation. This will go on for quite some time, I believe, until there is a massive reform in Pakistan and that will take time as we go forward. As regards to the situation with China and the US, you must remember that Trump plays the markets like a fiddle.
If he sees the markets going down, he will make some changes in order to allow the market to move up again. So, it is not all over. There is going to be more and more back and forth between China and the US. Must remember at the end of the day what Xi Jinping wants is Taiwan and that is the big-big issue overhanging the US and China and that is not going to go away soon. Hopefully, they will reach some kind of an agreement, but I believe that the big problem with China as we have seen in the past is that there have been many agreements, but the question is does China adhere to those agreements?
Will they follow up on those agreements? That is where the US has got to be very careful and, of course, I am sure they are well aware of this problem. So, yes, the markets will do well if the agreement is reached, but it is not over. It is going to take a long time to see the ultimate conclusion of the situation.
When I spoke to you last, you were slightly tentative about Indian market valuations. Are you convinced now? I mean, India has been one of your large positions. Are you looking at increasing the exposure now?
Mark Mobius: Yes, I will. Well, we have a new fund and we want to get into the Indian market, but the problem is, it is up to three months now we have been working to try to get into the Indian market. The paperwork and bureaucracy is incredible. It is very important for India to loosen up on these regulations to make it easy for people to invest particularly now that you have this opportunity to take business away from China and so it is very important that India opens up more and more.But yes, India and as soon as we are able to, we will be investing in Indian stocks. We have got a number of ideas, the defence sector is very interesting. Pharmaceuticals is going to be interesting now in view of what Trump said because now US pharmaceutical companies will have to look for lower price pharmaceuticals that India can supply, so that is going to be very interesting going forward and, of course, we always like the IT sector in India, that is going to be a very good sector to be active in going forward.
Your holdings were APL Apollo, Persistent, Vodafone, and if I am not wrong, Waaree Renewables, right?
Mark Mobius: Yes. These are all great stocks, but we are looking at other stocks. Cannot say which ones yet, but we are looking at a number of new opportunities in India. As you know, India’s tech sector is deep and there are many companies that have great opportunities. So, we are looking at all those.
You mentioned that Indian IT companies are great companies. While these are great companies, cash rich companies, strong buybacks, but there is no growth. Growth is sub-10%. Would you still buy these stocks?
Mark Mobius: No. First, we are looking for growth, that is the reason why we look beyond those stocks to look at companies that just are coming up, that are now at the bottom or now just starting and have great growth prospects. Of course, we want stocks that have a good return on capital but most important is growth, earnings per share growth and that is something we want to focus on.
Why is that China despite attractive valuations is not getting what was called as easy trade? US money will move out of US. It will go to emerging markets. Within that India is expensive, it will go to China. Why is that easy trade easy trade not panning out?
Mark Mobius: The problem is that a lot of US investors have been focusing on the US market. They see great opportunities, the US particularly now with the reforms that Trump is instituting. However, after the US, India is number one.
There is great-great opportunities in India provided that the Indian market is more open and that there is a cut down on bureaucracy, very important. In order to get, for example, semiconductors going in a big way in India, there has to be incredible deregulation to allow people to bring in equipment, to allow them to bring in components, etc, etc. These are essential for the production of semiconductors.
How much more do you think this comeback trade in US equities will also extend itself because most of the US markets including the Dow and Nasdaq, they pretty much have retraced what they had lost after the tariff selloff. So, even though tariffs are at play and US economy decisively will slow down in second half, US markets have been quite resilient.
Mark Mobius: Yes, well, do not forget we are about halfway up from the bottom. We have got another 50% to go to reach where we were before, that is number one. Number two, you must remember now with the Trump policies, the whole situation in America is changing. We now have to start focusing on companies that are domestically oriented, that are producing domestically and not dependent upon imports, that is a big-big change. So, you cannot be looking at the stocks that were doing well last year anymore. You got to look at new stocks that you have not noticed before because they were not on the radar. People were not looking at them because they were just domestic producers, so that is going to be a big change in the US going forward.
What about Indian banks? Historically, you liked some of the Indian banks and I remember you had a large exposure to HDFC Bank and some of the other private banks. Are you looking at increasing your exposure there even after the recent runup?
Mark Mobius: Yes, we are looking at the banks. But before the banks as I said defence. The defence sector, the IT sector, pharmaceutical sector, those will come first before we look at the banks, but yes, there are some opportunities in banking.
