LONDON, Feb 18 (Reuters) - Worries about liquidity in some bond markets are overblown and emerging market asset prices do not reflect reality, Franklin Templeton's star bond fund manager said in a video posted on the firm's Twitter feed late on Wednesday.
Michael Hasenstab, chief investment officer of Templeton Global Macro, said regulatory improvements and expanding buyer bases mean investors can now trade billions of dollars of Mexican or Korean bonds without moving the market.
"The liquidity in the local markets has improved, not decreased," he said. "So this fear over liquidity in many cases is a little overblown and not consistent with the empirical evidence we've seen."
Hasenstab added that emerging market asset prices did not reflect economic fundamentals, with the Mexican peso and Indonesian rupiah trading worse than they did during the global financial crisis, the Asian crisis and the Tequila crisis.
Mexican, Korean and Indonesian sovereign bonds feature heavily in the top ten holdings of the $53 billion Templeton Global Bond fund managed by Hasenstab, as of the end of January.
"We've blown through almost every level. So the financial markets are saying there's a crisis, but when we travel to these countries ... yes, growth is decelerating but it's not collapsing," he argued. "So this is a fantastic opportunity when you have a huge disconnect between reality and market prices."
Investors pulled billions from emerging market funds in 2015 and the selling has continued into 2016. But Hasenstab has made a name for himself by taking a contrarian stance and buying markets shunned by others, such as Ireland, Hungary and Ukraine.
The Mexican peso surged nearly 5 percent on Wednesday after a surprise increase in interest rates to 3.75 percent as the central bank attempted to defend its currency against speculators.
Hasenstab also reiterated his views that China was rebalancing, with growth in services and consumption largely offsetting the hard landing in the industrial sector.
Reporting by Claire Milhench, editing by Larry King