Veteran EM investor Mark Mobius reveals the 2 tech giants that are key to any portfolio

Mark Mobius, a veteran emerging markets investor, has identified Tencent and Alibaba as the two key stocks for any portfolio that invests in developing economies. Mobius stated that the Chinese tech giants could be "the foundation of any portfolio", despite recent volatility. He said that despite their "incredible decline" in share prices, they are still "making good profits". Alibaba's stock peaked on October 2020, just before new Chinese government restrictions were announced on technology companies. Since then, shares have fallen by over 70%. Tencent, which peaked at the beginning of 2021, has also fallen more than 60% along with the growth technology sector. BABA 5Y line Alibaba Mobius founded Mobius Capital Partners, a financial services firm, in 2018, after spending three decades with Franklin Templeton. He said that the "interesting" aspect of Alibaba was its potential spinoffs. "Which could be very, extremely good for them." Alibaba announced in March that it would be splitting into six different business groups, with each group having the capability to raise outside capital and go public. This was the biggest reorganization of the Chinese ecommerce giant in its history. It announced last week that it would list its first spin-off, Cainiao, the logistics unit, on the Hong Kong Stock Exchange. Mobius, who is known for picking smaller companies he believes in over the long term, has emphasized the resilience of these two Chinese tech giants. Mobius said Friday on CNBC Street Signs Asia that the two Chinese tech titans are still making profits despite their massive decline. Analysts at investment banking firms also think that Alibaba's decision of reorganizing into multiple, independently listed divisions is going to "unlock" value in a period when economic growth has slowed down in the second largest economy. "Despite economic uncertainty, the consumer demand seems to be open to price reductions, driving [customer-management revenue] revenue up by double digits.
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In a client note dated August 10, Mizuho Securities' analysts, led by James Lee, reported a significant increase in profitability. Mizuho raised its price target for the stock from $145 to $145. This represents a 70% increase over current levels. Analysts said that with a decentralized approach, they expect the six units to be in a position to compete and unlock value via listings. Mobius, a former Franklin Templeton asset manager who managed $50 billion in assets, predicts China will "surprise" the world and make "incredible advancements" over time with its chip capabilities, due to government policy priorities. Mobius, who previously managed $50 billion worth of assets at Franklin Templeton, predicted that China will "surprise the world" and make "incredible advances" in chip capabilities over time, driven by government policy priorities. It won't happen overnight. "But it will happen, I think, and we'll see incredible advancements in that area." Mobius stated that China's aim is to surpass the U.S. semiconductor market, and this requires advancements across the entire tech ecosystem. Mobius cited Huawei's recent breakthrough in chip technology as proof of Beijing's "incredible" resources directed towards the semiconductor sector. The veteran stock picker has revealed that he prefers lesser-known semiconductor companies over TSMC or China's SMIC. Mobius Emerging Markets Fund invests in Taiwan's Elite Material, which produces the base materials used for circuit boards in electronic devices. Zilltek Technology designs and develops board circuits. LEENO, a South Korean company that tests semiconductors, is the largest stock held by this $42 million fund.
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The fund manager praised the profitability and agility of smaller tech firms in the area, but admitted geopolitical risk. If something bad happens in Taiwan, the only thing that can be done is to use brainpower. They can leave at a moment's notice. They already have operations in California, and elsewhere around the globe. Mobius said that these are "really very interesting" companies.