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China IPO Supply May Be too High: Mobius


The recent surge in Chinese initial public offerings has made a lot of people a lot of money, but the market seems to be getting oversupplied and overvalued, Mark Mobius, executive chairman of Templeton Asset Management, told CNBC Thursday.

Mobius: China is My Top EM Pick

“You’re seeing these IPOs come in at 20 times earnings, 30 times earnings. That’s a little bit too rich I think,” Mobius said. “I think there’s a little bit too much supply now.”

“The quality of some of these is not what it should be and of course the pricing has been a little bit too high,” he said.

- Watch the first part of the CNBC interview with Mark Mobius above, the second part here and the third part here >>>

The rush for Chinese companies to raise money by going public will continue because the recent success will give companies confidence to keep supply going, according to Mobius.

Even though the Chinese IPO market is showing signs of overheating, Mobius still considers the region to be the most attractive emerging market around. However, overcapacity could cause company failures ahead, he said.

“There will be failures, company failures, where there’s too much capacity and they’re not efficient,” Mobius said.

“There’s no question there is overcapacity in almost every direction in China. In housing, in manufacturing, you name it,” he said. “But this capacity will eventually be taken up.”

The Chinese government has been pumping money into the economy and encouraging banks to lend, which means that there definitely will be continuing investment, according to Mobius.

Mobius said he thinks the commodity market offers good investment opportunities, especially in Brazil and Russia. In the agriculture space, Mobius favors Brazil and the Ukraine.