Mark Mobius: Brexit Has Turned UK Into “An Emerging Market Economy”
With all hell breaking loose in Turkey this week, one would think Mark Mobuis, the pioneering portfolio manager who launched one of the first EM-focused funds more than 30 years ago, would be focusing his attention on an issue more germane to his area of expertise – like whether Turkey’s deteriorating financial position might breed contagion – or something along those lines.
Instead, he’s become the latest standard-bearer for “Project Fear”, warning during an interview with the FT that the UK already resembles an “emerging economy” and that the situation will only get worse once it finally departs the EU – particularly if it does so without a. deal.
“The UK is like an emerging market now. Their balance of payments is terrible; their government debt is terrible; their fiscal debt is terrible,” said Mr Mobius, who spent most of his career working for the US asset manager Franklin Templeton.
Subtly equating the UK with Greece and Portugal, Mobius argued that once the UK leaves the EU, ratings agencies will be forced to downgrade its sovereign credit rating once it no longer can “ride the coattails” of the trade bloc.
“Up to now, the UK is riding on the coat-tails of the EU, in the sense that [the UK] can have very low interest rates,” Mr Mobius told the FT at an event in New York this week hosted by the Emerging Markets Investors Alliance.
“As soon as they break, people are going to start looking hard and fast. The rating agencies will say ‘wait a minute, no more EU association? We’ve got to downgrade.'”
But getting at the real reasons behind his antipathy toward Brexit, Mobius lamented the fact that the UK might lose its status as a center for emerging market countries, thanks to its dominance in global FX markets, and the fact that many companies based in emerging markets list their shares in the UK. As it stands, Mobius can just hang out in London and “these people will come to us”. But that could easily change.
“The unfortunate thing for us in emerging markets is that the UK is really a centre for emerging countries for [public] listings or for company meetings,” Mr Mobius said.
“We can sit in London and these people will come to us.”
If the UK leaves without a deal, some 5,500 UK businesses would lose their “passporting” privileges – meaning they would need to deal with a separate set of regulatory guidelines to do business in the EU. If the UK leaves wiithout a deal, Mobius said his firm would likely leave London for “Paris, Munich or somewhere else.”
“We’ll have to go to Paris, Munich or somewhere else in the EU,” Mr Mobius said of his firm.
“I would like to go to Spain. I want warm weather.”
Does Mobius really feel that the British people “made a mistake” when they voted for Brexit? Or is he just cranky that his firm might face a heap of new regulatory hurdles and might need to move?