Emerging markets guru Mobius: Global recovery is leaving the U.S. behind

The global economic recovery is "well in place" and may accelerate as growth in developing nations counters a slowing pickup in Japan and the U.S., according to Templeton Asset Management Ltd.'s Mark Mobius.

The so-called BRIC markets of Brazil, Russia, India, and China, as well as Turkey and South Africa, will drive the recovery, said Mobius, who predicted the bull-market rally in emerging markets in March 2009. The MSCI index of 21 developing nations has doubled since it bottomed out in March 2, 2009.

Goldman Sachs Group Inc. and Pacific Investment Management Co. Chief Executive Officer Mohamed A. El-Erian said this month there's at least a 25 percent chance of the U.S. falling back into a recession, while the Federal Reserve flagged a weaker- than-anticipated recovery in the U.S. Mobius said increasing liquidity will help shield developed economies including the U.S. from a so-called double-dip recession.

"That's the U.S., but the rest of the world is moving in a different direction," Mobius, who oversees about $34 billion as Singapore-based executive chairman of Templeton's emerging markets group, said in a Bloomberg Television interview. "Going forward, the numbers will get better and better."

Japan's gross domestic product expanded an annualized 0.4 percent in the three months ended June 30, while the U.S. economy grew at a slower-than-estimated 2.4 percent annual pace, data released this month showed. While China's growth slowed to 10.3 percent during the quarter from 11.9 percent in the January-March period, that was enough to help the economy overtake Japan as the world's second-largest.

'Not Too Bad'

"Even if we see a slowdown in China from 10 percent to 8 percent, that's not too bad," Mobius said. "If it goes to 5 percent, we'll get worried."

The stronger recovery in emerging economies has helped stock markets outperform those in developed nations. The MSCI Emerging Markets Index rose 0.3 percent as of 2:05 p.m. in Singapore, trimming its losses this year to 0.1 percent. The MSCI World Index was up 0.1 percent after having slumped 5.3 percent in 2010.

"Given that there won't be a double dip, we still think that there will be a continuing bull market," Mobius said. "Valuations are not as reasonable as they were at the beginning of 2009 and at the end of 2008. We can find opportunities, but they're not as easy."

In China, Templeton Asset Management is "selectively" seeking out consumer and manufacturing stocks as corporate earnings benefit from a shift in the economy's dependence on exports to domestic spending, according to Mobius. He's "not too interested" in the nation's banks, citing the prospect of an increase of as much as 20 percent in non-performing loans.

Brazil remains his top pick among developing nations, he said, citing the nation's natural resources and a shrinking income gap. He favors the nation's banks and raw material producers including Vale SA, the world's third-biggest mining company.