Emerging markets guru Mark Mobius says he sees a soft landing for China, and thinks it is “very possible” that the country’s renminbi will become one of the world’s reserve currencies by 2020.
“The high-growth economies of China and other emerging Asian and Latin American countries lost some momentum as 2011 wore on, but to me they now appear poised for softer landings than their developed-market counterparts,” Mobius, of Templeton Asset Management, tells Citywire. “During the last quarter, inflationary pressures eased further in China and the industrial sector again recorded strong growth. … China will boost domestic consumption to offset an export slowdown and allow for faster gains in the renminbi to tame inflation. We also see consumer stocks benefitting from rising incomes. Among consumer stocks favoured are Dairy Farm International and, within energy, companies such as CNOOC.”
Mobius has about 20% gross exposure to China across his portfolios, he says. And he thinks the country’s currency will gain in prominence in coming years. “Despite global reservations stemming from China’s status as a developing country and its cautious approach to monetary policy, it is very possible that the renminbi could become a global reserve currency by 2020,” he says. “The renminbi might potentially replace the role of the Japanese yen, given that its usage was driven by Japan’s former economic dominance.”