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Mobius Sees 20% Fall in Emerging-Market Stocks

By Michael Tsang

(Bloomberg) — Emerging markets are attracting more money from initial public offerings than industrialized nations for the first time ever, a warning sign to Mark Mobius that the record rally in the shares may turn into a 20 percent decline.

Faster economic growth may help China, India and Brazil produce the biggest increases in IPOs and almost double sales to $200 billion worldwide, according to Matthew Johnson, the New York-based head of the global-equities syndicate at Barclays Plc. Poland alone may offer more than $10 billion of state-owned companies, according to estimates by UniCredit SpA.

Companies in the MSCI Emerging Markets Index trade at the highest levels relative to earnings since 2000 after the gauge surged 75 percent and IPOs in developing economies raised $77 billion. The 2009 sales exceeded industrialized nations by 160 percent, the first time developed countries attracted less money, annual Bloomberg data starting in 2000 show.

"When you look at the size of some of these IPOs, they're pretty massive," Mobius, 73, who oversees $34 billion of developing-nation assets at Templeton Asset Management Ltd., said in a telephone interview from Tokyo. "At the right price, the IPOs will be absorbed, but you're going to have some hiccups. It's too much supply coming out."

Investors snapped up new shares in developing nations as China led the recovery from the first global recession since World War II. The MSCI Emerging Markets Index of 22 countries rebounded from its worst annual performance to post the biggest gain since data began in 1988. The MSCI World Index of stocks in 23 industrialized economies climbed 27 percent in 2009.

Stocks Gain

The gauge for emerging-market equities advanced 1 percent to 1,014.4 at 7:57 a.m. in London, heading for the highest close since Aug. 1, 2008.

Metallurgical Corp. of China, the Beijing-based company that helped build the Bird's Nest Olympic stadium, sold $5.1 billion in Shanghai and Hong Kong in September. Banco Santander (Brasil) SA, the Sao Paulo unit of Santander, Spain-based Banco Santander SA, held Brazil's biggest initial offering ever in October. The bank raised a total of $8 billion as underwriters exercised an option to buy more securities in November.

The average developing-nation offering beat the MSCI Emerging Markets Index by 39 percentage points in 2009, data compiled by Bloomberg show.

Shanghai Stock Exchange IPOs may more than double to 380 billion yuan ($56 billion) this year and rise 96 percent to HK$370 billion ($48 billion) in Hong Kong, based on a Dec. 21 report from Ernst & Young LLP and data compiled by Bloomberg.

China's Sales

The combined value of China's sales would be more than twice the $40 billion to $50 billion in the U.S. forecast by London-based Barclays last month.

Agricultural Bank of China in Beijing may raise 200 billion yuan this year, Li Fuan, head of the China Banking Regulatory Commission's banking innovation department, said last month, the Securities Times in Shenzhen reported.

United Co. Rusal, the world's largest aluminum maker, will sell a 10.6 percent stake for as much as HK$20.1 billion, a statement filed with the Hong Kong Stock Exchange said last week. The company controlled by billionaire Oleg Deripaska would be the first Russian stock sale in Hong Kong. Paulson & Co., the New York-based hedge fund run by John Paulson, and NR Investments Ltd., the firm of Nathaniel Rothschild, will buy shares, the prospectus showed.

Rusal, Alcoa

The HK$9.10-to-HK$12.50 IPO price range would give Moscow- based Rusal a so-called enterprise value, or the sum of its stock and debt minus cash, of 10.6 times to 13.3 times its 2010 forecast earnings before interest, taxes, depreciation and amortization, said two people familiar with the information. New York-based Alcoa Inc., the biggest U.S. aluminum company, has an enterprise value-to-estimated 2010 Ebidta ratio of 9.25, according to data compiled by Bloomberg.

Regions : Asia

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