Introduction

Veteran emerging markets investor Mark Mobius believes that Alibaba and Tencent are essential stocks for any portfolio investing in developing economies. Despite recent volatility, Mobius argues that these Chinese technology giants could form the foundation of a successful investment portfolio due to their continued profitability.

Alibaba’s Performance

Alibaba’s stock, listed on both the NYSE and the Hong Kong stock exchange, experienced a significant decline in its share price over the past three years. However, Mobius highlights that the company’s potential spin-offs could lead to positive outcomes in the future. In March, Alibaba announced a reorganization plan into six business groups, each with the ability to raise outside funding and go public. This move is expected to unlock value for investors.

Tencent’s Performance

Similar to Alibaba, Tencent’s stock also faced a decline in its share price, along with the broader growth technology sector. Mobius emphasizes the resilience of both companies, as they continue to generate good profits despite the challenging market conditions.

Mobius’ Perspective on Chip Stocks

Mobius predicts that China will make remarkable advances in chip capabilities, driven by its government’s emphasis on this sector. He believes that China aims to surpass the U.S. in semiconductors, which requires advancements across the entire tech ecosystem. Huawei’s recent chip breakthrough serves as evidence of Beijing’s commitment to this goal. While Mobius acknowledges geopolitical risks, he expresses a preference for lesser-known companies involved in the semiconductor sector over industry giants like TSMC and China’s SMIC.

Conclusion

Mark Mobius, known for his long-term conviction picks, recommends Alibaba and Tencent as key stocks in developing economies. Despite recent stock price declines, he highlights their profitability and potential for future growth. Additionally, Mobius foresees China making significant advancements in chip capabilities, presenting investment opportunities in the semiconductor sector. However, he cautions investors about geopolitical risks and suggests considering smaller tech companies in the region.