Investment fund sees emerging currencies rout as opportunity

NEW YORK, May 29 — A selloff in emerging-market currencies has created a buying opportunity for Franklin Templeton Investments.

Eric Takaha, a money manager at the investment company, which oversees more than US$894 billion (RM3.258 trillion) in assets, said he sees value in Mexican and South Korean bonds after a gauge of developing-market currencies tenders fell to a 12-year low in March.

Emerging markets slumped during the past year as traders moved funds back to the US in anticipation of the Federal Reserve’s first interest-rate increase since 2006. The US economy, however, has grown at a modest pace, and is forecast to lag behind nations such as South Korea and Mexico.

“We actually are finding select opportunities,” Takaha, who focuses on corporate and high-yield debt, said at a media briefing in New York yesterday. “The market has sold off all currencies relative to the dollar during this period of time and we think there are certain countries in certain emerging areas that should have better growth profiles than the US over the long term.”

Franklin Templeton favours short-dated Mexican sovereign debt to benefit from any appreciation in the peso.

Mexico’s currency has fallen 16 per cent in the past 12 months while South Korea’s won slumped 7.7 per cent. Bloomberg’s gauge of the greenback has gained 18 per cent in the same period.

Broad dollar strength will continue as the US moves to tighten monetary policy, Takaha said.

That contrasts with a backdrop of global easing, encompassing central banks from Europe to Japan and Australia. The European Central Bank reiterated its commitment to stimulus last week, seeking to quash talk of an early end to quantitative easing after economic reports from the region exceeded expectations.

A weak euro is “very positive” for European exporters and will help lift corporate earnings, according to Katrina Dudley, a money manager for the Franklin Mutual Series who’s based in Short Hills, New Jersey.

“Europe’s street is actually looking pretty good to me,” she said at the briefing. — Bloomberg