The worst isn’t over for emerging markets after the benchmark stock index sank to a five-month low and the nations’ currencies tumbled, said Templeton Emerging Markets Group’s Mark Mobius.

“The negative sentiment is pretty much in place so you can expect a lot more selling,” Mobius, 77, who oversees more than $50 billion in developing-nation assets as an executive chairman at Templeton, said in an interview from Rio de Janeiro today. “We are looking but actually not buying at this stage. Prices can come down or take time to stabilize.”

Emerging-market assets are tumbling as China’s economy slows, weak currencies from India to Turkey spur central banks to raise interest rates and the U.S. Federal Reserve pushes ahead with plans to reduce monetary stimulus. Investors removed more than $12 billion from developing-nation equity funds in the past two weeks, the biggest outflow since January 2008, according to Morgan Stanley, citing data from EPFR Global.

The retreat dragged down the MSCI Emerging Markets Index’s valuations to 11 times reported earnings at the end of last week, a 40 percent discount versus the MSCI World index, the widest gap since October 2008, data compiled by Bloomberg show. More than $2 trillion has been erased from global equities this year.

Market volatility will rise toward its long-term average and that means an increase in risk premiums, said Philip Moffitt, the head of fixed income in Sydney for Asia and the Pacific at Goldman Sachs Asset Management, said in an interview yesterday.

David Fuller's view

Here is the Bloomberg article.

I maintain that 2014 will be a choppy year but sharp downside moves lower valuations in a gradually recovering global economy and create buying opportunities.  (See Thursday’s leading item for more on this subject.)

The link to the article above will also give you access to Mark Mobius’ latest interview with Bloomberg.  It is well worth listening to as no one in the business is more experienced and knowledgeable on the subject of emerging and frontier markets than this soft spoken, ever-travelling, ivory-suited 77 year old value investor.