Mobius’s Nightmare: What If Brexit And Trump Halt Globalization?

Mark Mobius is not best known for caution. But there’s one thing that has the “Godfather” of emerging markets concerned about recent events.

For now, Brexit is a buying opportunity. During a recent interview in London, the veteran and Executive Chairman of Templeton Emerging Markets Group told me that barriers to trade between Britain and Europe could be a boon for places like Poland, the Czech Republic and Hungary as manufacturing moves out of the UK.

Turmoil in the City – occurring at the precise time when China is loosening its monetary controls – could spur the flow of capital market activity into Asia, creating “another positive for emerging markets.”

A Britain unrestrained by Europe might begin to ease sanctions against Russia, and persuade the US to do the same – particularly if Donald Trump wins the presidency. After all, Trump has already stated he would open negotiations with Moscow.

And speaking of a potential Trump victory, even Mexicans have little to fear there, according to Mobius.

“Chances are, if and when he becomes president, a lot of things he’s been talking about will not come to pass because there will be opposition in Congress,” Mobius says in our interview. “There will be a number of barriers toward implementing a wall between the US and Mexico, for example. There will be a real problem in extraditing immigrants who are in the US.

“You will see a situation where Trump goes to Mexico and negotiates an agreement on immigration, and on a number of other things like that. He’s a negotiator, he’s a businessman.”

So, for emerging markets, does everything looks rosy? Not necessarily, he says.

Support for Trump – like Brexit and the Philippines’ new outspoken president inaugurated last week – reflect the frustration of people who want to tear down bureaucracy and move to reform. But there’s a fundamental danger to all of this. Reverberating on both sides of the Atlantic is that old adversary to capitalist progress: anti-globalization.

For emerging markets, says Mobius, “the biggest obstacle would be a worsening of the philosophy of capital market growth – in other words, if you have an isolationist stance on the part of politicians globally.

“Then, you have the end of globalization, which in turn feeds on people who want to avoid capital market reform.

“The growth of emerging markets has been dependent upon capital market reform and development, and market economy orientation. If you have an end to that, then you have problems.”

Listen to our exclusive interview with Mark Mobius, where we discuss topics ranging from China’s hidden economic growth to Indian privatization, Nigeria’s terrorist threat, why South Africa’s rand is 50% undervalued, the opportunity from Mongolia’s elections, Brazil’s state of turmoil and the country he’s most cautious on.