Veteran emerging markets investor Mark Mobius sees a bumper year ahead for riskier, high-yielding assets as hundreds of billions of dollars flows off bank balance sheets and back into markets.
While banks had so far used ample central bank liquidity to bolster balance sheets and buy safe-haven US Treasuries, Mobius told Reuters that sentiment was turning towards greater risk appetite.
"I think this year is going to be a very big year because there's a lot of money that's sloshing around," the executive chairman of fund manager Franklin Templeton's emerging markets group said in a telephone interview.
"Now that's beginning to find its way into the markets so you can expect a bigger end impact from this pile that's been building up for the last two years."
Emerging market stocks, Mobius's specialty, have been a roller coaster ride since the financial crisis: the MSCI emerging stock index surged back nearly 75 percent in 2009, gained 16 percent in 2010 and slumped 20 percent in 2011.
Although the index rose over 15 percent last year, it is still about 20 percent below its 2007 all-time high.
For 2013, Mobius - who helps oversee $51 billion in emerging market funds - likes Africa for its rapid growth, consumer-linked sectors in Latin America and small to mid-cap companies in emerging markets in general.
"An interesting aspect now is the move for many managers to go for smaller and medium cap companies," he said. "In all emerging markets, including for Mexico and Brazil, people are looking down the list to the smaller companies to seize opportunities."
Mobius's $2.4 billion Templeton Developing Markets Trust lagged the average of diversified emerging market funds in 2012,