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May 27, 2010, 12:50 AM EDT

U.S. stock markets are oversold and may rally strongly over the next few days, said investor Barton Biggs, who runs New York-based hedge fund Traxis Partners LP.

“I think they’re going to stabilize in this general area, and then we’re going to have a significant move to the upside,” Biggs, whose flagship fund returned three times the industry average last year, said in a Bloomberg Television interview.

Biggs recommended buying U.S. stocks last year when benchmark indexes sank to the lowest levels since the 1990s. The Standard & Poor’s 500 Index rallied 23 percent in 2009 as governments worldwide mounted stimulus programs to counter a recession. On March 22 this year, Biggs told Bloomberg TV U.S. stocks had the potential to rally a further 10 percent. The S&P 500 has since shed 8.4 percent.

The S&P 500 is down 10 percent in May, poised for its worst month since February 2009, as credit-ratings downgrades of Greece, Portugal and Spain add to concern some European nations will struggle to fund deficits. Futures on the S&P 500 gained as much as 0.8 percent today, as Japan’s exports grew for a fifth month, and New Zealand and South Korea posted trade surpluses.

“The market is very, very oversold, and I think we’re going to have a big pop to the upside some time in the next couple of days,” said Biggs. “I wouldn’t be surprised to see us go to a new recovery high, just to make everybody squirm.”

Europe ‘Serious’

The S&P 500 lost 0.6 percent yesterday on concern the credit crisis will worsen. The China Investment Corp. decided to maintain its investments in Europe after having debated lowering its allocation to the region, Reuters cited Gao Xiqing, president of the sovereign wealth fund, as saying.

“The European concerns are serious, and I take them seriously,” Biggs said today. “I just don’t think that the worst is going to happen.”

Templeton Asset Management Ltd.’s Mark Mobius said yesterday he’s been buying stocks in Brazil, Russia, India and China in the past month and called the slump in emerging-economy shares a “correction” in a bull market.

“Despite the fact that a lot of people think that we are entering into a bear market, we don’t believe so,” Mobius, who oversees about $34 billion in emerging markets as Templeton’s Singapore-based executive chairman, said in an interview in Cairo. “When the time comes, emerging markets will recover faster and in a big way.”

--Editors: John McCluskey, Sam Waite.

To contact the reporters for this story: Shani Raja in Sydney at sraja4@bloomberg.net.

To contact the editor responsible for this story: Darren Boey dboey@bloomberg.net.