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To: goldsnow who wrote (22211)	10/24/1998 3:35:00 PM
From: Alex	Read Replies (2) \| Respond to of 116756

MORE THAN FUNDAMENTALS Mobius preaches shareholder rights ------------------------------------------------------------------------ The Wild Ride Asia's performance MARK MOBIUS of U.S-based Templeton Global Investments likes to see for himself what's going on at street level. So the emerging markets guru's schedule can mean he's in Eastern Europe one week and Latin America the next before coming back to his home base in Asia. To catch up with Mobius, Asiaweek's Alexandra A. Seno arranged to talk with him while he was in Seoul, conducted the interview while he was in Hong Kong, then asked him follow-up questions via mobile phone while he was onboard a Tokyo commuter train. Here's what Mobius has to say about the U.S. interest-rate cuts and their effect on bourses as well as the prospects for the world's emerging markets: Is this rally we are seeing in many Asian markets really sustainable? No. When the market moves so rapidly there's usually a fallback. The movement of the last few days was too dramatic. But I think it is a sign that we are nearing the bottom, especially for the markets of Thailand, Singapore, Korea, Hong Kong. All of them are nearing the end of the bear phase. Are you anticipating more interest rate cuts in the U.S.? I think we can expect more because the export numbers are still quite negative. As earnings come in especially in Japan, they will probably cut back some more. The situation doesn't look so good. I will not be surprised if rates are brought down more. Among emerging markets, what places concern you most these days? The key is Brazil. Everyone is looking at it as the test case to see if the U.S. can take measures to stop the fall in confidence. If Brazil can be "saved," there will be a feeling that world powers are not powerless. Right now, there is no political will to make vital pension reforms, which is the key. If President Fernando Henrique Cardozo can do them, Brazil will do well. If that doesn't happen, if Brazil goes, then Argentina goes and you will see a general decline in emerging markets. The other key is Russia which is coming along with fundamental reforms. But the situation remains very risky politically. As someone who has been in emerging markets for a long time, did you expect poor performance over the last year? We're not surprised by the high volatility. But allowing hedge funds access to large amounts of money opened a Pandora's box especially for emerging markets. The derivatives markets are too popular and too unregulated. But we are going to see big changes. There will be changes in the way many banks handle hedge funds. The problem of government regulation of leveraging and of hedge fund instruments will come under scrutiny. Does this new environment mean a bleak outlook for emerging markets? No, not in the long term. In the short term, we've had to readjust strategy. We're restructuring portfolios to have more liquidity, for example. When we started in 1987, we had $100 million, now we have billions. We're in much better shape in many ways. What are you buying? I cannot name them because we're currently in the process of buying into them. But they are corporations in Asia, Latin America, Eastern Europe. Some are very big companies. What issue matters most to you as an investor today? We are looking a lot at shareholders' rights. We are looking more at corporate governance and how minority shareholders are treated. In some countries, the securities and exchange commissions are simply not doing their job in trying to protect minority shareholders. This is going to have to change. As a result of the downturn, people are going to demand transparency and economic democracy. These are tied. A lot of us thought for a while that it wasn't, but now we know that democracy and economic development go hand in hand. Now we not only evaluate companies based on profit and loss statements and balance sheets, we also evaluate the people behind the company. If they cheated investors in the past, we won't touch their company. Which countries? It's all around. What are you doing to change this? We are trying to talk to these people to strengthen shareholders rights. We keep pointing out to them that they will not attract investment if they stay this way. Now Templeton is involved in legal action to recover money in certain places. To make markets more attractive we have to get those changes in compliance regulations or just to get better implementation and enforcement of existing laws and regulations. What are your plans for such countries as Vietnam where you had a fund? That is a dead issue. People are not going to want to invest in a country where the rules are not in place. Vietnam and that area of Indochina have been left behind as a marginal market. pathfinder.com