Legendary investor Mark Mobius says forget Russian stocks for a year — and suggests Chinese stocks will emerge as winners as Moscow turns its gaze east
- Forget Russian stocks for at least a year even after the market there reopens, Mark Mobius said.
- China will be a winner because Russia will be more trade-reliant on the country, he told CNBC Monday.
Legendary investor Mark Mobius suggested shunning Russian stocks for at least a year even once trading resumes, and touted Chinese stocks as beneficiaries from the geopolitical shifts that are likely to ensue from the Ukraine conflict.
"Even if you want to buy Russian stocks, who's going to hold it for you?" he said Monday on CNBC's "The Exchange. No banks will want to be a custodian for them, and doing so would mean buyers can't retrieve their money, he added.
The effects of strong retaliation by the US and its allies against Russia's attack on Ukraine are spreading around the world, with the latest sanctions expected to disrupt the global flow of oil, coal, natural gas, and other commodities originating from the country.
Russia's major stocks tumbled by more than 90% before its stock market was shut in its longest-ever closure, while the ruble tumbled to a record low. Stock exchanges from New York to London to Germany also halted trading in Russian equities, with major indices calling them "uninvestable."
"You just got to forget about Russia for, at least, maybe a year. It depends on what happens in Ukraine, but it doesn't look good. It's not a good idea to get into Russia now," Mobius added.
He also advised investing in companies that have either little or no debt since central banks around the world are expected to raise interest rates, which could squeeze profits.
What's also crucial, according to him, is being diversified.
"What's happening now in Europe teaches a big lesson towards diversification. So those people who had money in Brazil, in South Africa, in parts of Asia, are doing fine and not being hurt so much," Mobius said.
In the aftermath of Russia's spiraling conflict with Ukraine, the famed investor flagged Chinese equities as stable investments, as well as gold and other emerging-market stocks.
He reiterated his support for them again, saying China will profit, because Russia will have to trade with it more. "They'll have to depend on China more and more," he said.
China has been unwilling to criticize Russia over its attack on Ukraine, and said it opposes the West's sanctions.
Mobius said Chinese stocks haven't fared well in the past year, describing their performance as "very bad," with the weakening property market weighing on the economy. The Chinese government also hardened regulation in various sectors throughout last year, spooking investors into the future prospects of related stocks.
But Mobius expects stocks in the region to rebound as the government cuts key interest rates to bolster growth and funds infrastructure projects.
"I think this bear market we've seen in China won't last. There'll be opportunities in China, as well," he said.