Are the Emerging-Markets Really Slowing Down?

By: George Cole Scott
President & Sr. Portfolio Manager
Closed-End Fund Advisors

The emerging markets now have “tempered their growth”, according to a report in the Wall Street Journal, contributed by their reporters in Johannesburg, and New Delhi.Item: “Fresh signs of economic weakness in Brazil are adding to a growing worry for the global recovery”?Really?Mark Mobius, in his February 7 blog, (www.mobiusblog), wrote that there is ‘’Order and Progress on the Rise in Brazil” saying that it …is the most beautiful and economically vibrant (country) in the western hemisphere” and “its Portuguese multiracial population of almost 200 million represents a growing and upwardly consumer market’’.

The WSJ continues: “That is a big concern amid the drag of the European debt crisis and a sluggish U.S. recovery. Brazil, China, Russia, India and South Africa are among the most dynamic economies that have helped the world bounce back from the 2008 financial crisis”.

“This time around they seem less likely to provide the same boost as they deal with problems such as strong currencies, inflation, deficits, and real estate bubbles…as growth forecasts are falling across the developing world.”

Brazil recently said that its economy grew around 2.7% in 2011, less than half the rate the government predicted a year ago. China’s Premier Jiabao reduced the country’s annual growth rate to 7.5% and India said its economy grew 6.1% in the final quarter of 2011, its slowest pace in two years. Other emerging economies are also showing slower growth.

That may be true, but Mark pointed out to us earlier this year that the balance sheets of the emerging markets are the strongest in the world, with debt levels declining and their growing middle classes are adding to growth rates. Mark is not one to be pessimistic; after many years of interviews with us, he always sees the bright side, and is often quoted saying, “the optimists win, and the rest are left behind.”

Mark manages billions of dollars in funds, including The Templeton Emerging Markets Fund (EMF), Templeton Dragon Fund (TDF) and The Templeton Frontier Markets Fund (TFMAX) that are held in portfolios of clients of Closed-End Fund Advisors.

We are sending this report to Mark for his comment, either directly to us, or in his latest blog or both.

Thanks Mark!