MANILA - Veteran global fund manager Mark Mobius said corporate governance is a prime consideration when investing in emerging markets like the Philippines.
“We look at good corporate governance, especially those that pertain to the minority shareholders,” Mobius, the executive chairman of California-based Templeton Asset Management Ltd., told abs-cbnNEWS.com/Newsbreak during a recent trip to Manila. He added that the quality of management is also a criteria. “We look at the management. Specifically, we look at their program for growth.”
These 2 criteria, however, are already considered in their current Philippine holdings. “The problem is these are already priced in the market,” he said. He is now bullish in other emerging markets, including Russia, Brazil, Pakistan, and Turkey.
Keynoting a gathering in Manila of about 300 finance and investment practitioners in the Asia Pacific region, Mobius said the Philippines “has potential because of its natural and human resources.” He cited the importance of remittances from overseas Filipino workers to the local economy.
“But we cannot invest much because of liquidity concerns,” he said, referring to the limited buyers and sellers in the capital markets for large transactions, such as those that that they invest.
Templeton Asset manages about $30 billion of emerging market assets. In various funds, the Philippines account for less than 1% of its portfolio.
“The choices are not very good,” he said, referring to those that are not already included in their portfolio.
In the website of Templeton Asset, the fund management firm used to have or is still holding on to equity or debt issues of Globe Telecom, Manila Water, First Gen Corp, Ayala Land, Philex Mining, and Pepsi Cola Products Phils Inc.
It used to be an investor in San Miguel Corporation and in Philippine National Bank (PNB). About a decade ago, he raised hell when his stake in PNB incurred losses after the entry of businessman Lucio Tan into the bank.
Tan eventually acquired a controlling stake in PNB at prices lower than Mobius’ acquisition prices. At the time, Templeton's largest investment in the Philippines is its 13% stake in PNB, which it bought during the stock market bull run from 1993 to 1995.
Mobius said Templeton Asset looks at about 22,000 stocks worldwide. The fund managers screen the target stocks and look at the company's 5-year financial history. "We start at the back, at the notes portion [of the financial statements]," he said.
Of particular interest to them, as far as financial performance is concerned, are the growth in sales and earnings, dividend history, gross and net profit margins, debt levels, and return on invested capital.
The fund managers also compare the performance of the target company against the industry. Then they visit the company to personally meet key officials.
"It's not a science," Mobius stressed. "A lot of it is based on gut."