Looking beyond China for investment ideas
China is now a very large part of the MSCI Emerging Markets Index (roughly a third) and gives investors access to several exciting structural change themes, with companies there increasingly being acknowledged as global leaders.
Less well understood perhaps are the opportunities offered by the rest of emerging markets outside of China. There are many exciting opportunities to be found when you delve more deeply into the other 23 countries which constitute the MSCI Emerging Market Index; they are underestimated and diverse.
This paper examines the case for emerging markets ‘ex-China’ and what a portfolio of this type resembles.
Structural change is driving the emerging market opportunity
Ex-China markets are benefitting from some of the important changes we have previously identified as reshaping the investment landscape across the asset class, falling into the broad opportunity sets of Sustainable Planet, Demographics and Technology.
Roughly three quarters of our Global Emerging Markets portfolio stocks are exposed to these opportunity sets with many companies having exposure to more than one. Importantly, many of these companies also offer varying levels of support to the UN Sustainable Development Goals (SDGs).
In this paper we discuss why these opportunities exist, provide examples of key themes to which we are exposed and how portfolio companies are capitalising on them.
The exciting opportunities beyond China provide a small insight into the depth of the opportunity within emerging markets. The diversification offered by the many markets in the asset class cover a huge breadth of sectors and themes, with the added benefit of helping to support several Sustainable Development Goals.
Regulatory information and risk warnings
This information is issued and approved by Martin Currie Investment Management Limited (‘MCIM’), authorised and regulated by the Financial Conduct Authority. It does not constitute investment advice. Market and currency movements may cause the capital value of shares, and the income from them, to fall as well as rise and you may get back less than you invested
The information contained in this document has been compiled with considerable care to ensure its accuracy. However, no representation or warranty, express or implied, is made to its accuracy or completeness. Martin Currie has procured any research or analysis contained in this document for its own use. It is provided to you only incidentally and any opinions expressed are subject to change without notice.
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Past performance is not a guide to future returns.
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The views expressed are opinions of the portfolio managers as of the date of this document and are subject to change based on market and other conditions and may differ from other portfolio managers or of the firm as a whole. These opinions are not intended to be a forecast of future events, research, a guarantee of future results or investment advice.
Please note the information within this report has been produced internally using unaudited data and has not been independently verified. Whilst every effort has been made to ensure its accuracy, no guarantee can be given.
The information provided should not be considered a recommendation to purchase or sell any particular strategy / fund / security. It should not be assumed that any of the securities discussed here were or will prove to be profitable.
The analysis of Environmental, Social and Governance (ESG) factors forms an important part of the investment process and helps inform investment decisions. The strategy does not necessarily target particular sustainability outcomes.
Risk warnings – Investors should also be aware of the following risk factors which may be applicable to the strategy shown in this document.
- Investing in foreign markets introduces a risk where adverse movements in currency exchange rates could result in a decrease in the value of your investment.
- This strategy may hold a limited number of investments. If one of these investments falls in value this can have a greater impact on the strategy’s value than if it held a larger number of investments.
- Smaller companies may be riskier and their shares may be less liquid than larger companies, meaning that their share price may be more volatile.
- Emerging markets or less developed countries may face more political, economic or structural challenges than developed countries. Accordingly, investment in emerging markets is generally characterised by higher levels of risk than investment in fully developed markets.