With the pandemic dominating the short-term outlook, the longer-term advantages of emerging-market companies have become more important in the pursuit of return. Here are 5 positive trends:
Urbanisation remains a powerful force in emerging markets, with cities swelling in population as jobs migrate from the countryside. There are already 20 ‘mega-cities’ (i.e. with populations of over 10 million), a number that is projected to grow to 30 by 2030—largely within the Asia-Pacific region—and 9 of the 10 largest cities will be in emerging markets.1
Urbanisation generally brings with it growth of the middle class in emerging markets. That’s changing consumption habits – and sparking demand for a broader range of goods and services.
The Asia Pacific region in particular is expected to see middle income growth skyrocket by 2030 with 3.5 billion people in the middle class – over 150% growth in just 15 years.2
Emerging markets are adopting newer disruptive technologies and adapting to digital life faster than developed markets.
China is now the world’s largest e-commerce market, boasting some of the highest user rates of financial technology services for money transfer and payments, savings and investments, and borrowing. What’s more, China and South Korea are both on the front lines of future innovation – ranking among the top five countries for total patent applications.
Economic diversification has changed the shape of opportunity in EM. The last decade has seen a major shift away from energy and raw materials and toward consumer, financial and high-tech. That’s allowed more EM-based companies to act as industry leaders, especially in technology.
Emerging markets are forecast to grow almost three times as fast as developed markets over the next five years. EM’s share of global GDP, already 40.2%, should rise even higher.
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1 Source: United Nations, Department of Economic and Social Affairs. Based on countries in the MSCI AC Asia Pacific ex Japan Index
About the author
Martin Currie builds global, stock-driven portfolios based on fundamental research, devoting all of its resources to delivering optimum investment outcomes and superior client relationships.
Developed markets (DM) refers to countries that have sound, well-established economies and are therefore thought to offer safer, more stable investment opportunities than developing markets.
Emerging markets (EM) are nations with social or business activity in the process of rapid growth and industrialization. These nations are sometimes also referred to as developing or less developed countries.
Environmental, Social, and Governance (ESG) refers to the three central factors in measuring the sustainability and societal impact of an investment in a company or business.
Gross Domestic Product (GDP) is an economic statistic which measures the market value of all final goods and services produced within a country in a given period of time.
The MSCI Asia Pacific ex Japan Index is a market capitalization weighted index that is designed to measure the equity market performance of the developed and emerging markets in the Asia Pacific region ex-Japan.
The MSCI Emerging Markets (EM) Index is a free float-adjusted market capitalization index that is designed to measure equity market performance in the global emerging markets.
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