Emerging Markets:
Decarbonisation, tech innovation, demographic shifts. We take a look at the long-term megatrends reshaping the investment landscape in some of the world’s fastest-growing economies.
China
The Chinese economy is undergoing a profound transformation, based on:
Digitisation and cloud adoption
Localisation
India
The rise of India’s economy is a force to watch, thanks to:
Favourable demographics
Digital infrastructure
Vibrant entrepreneurial culture
In many industries, China is at an early stage of digitisation and cloud adoption.
The working-age population is set to increase by more than one sixth by 2050.*
Supply chain relocation
China dominates manufacturing supply chains with a global share of over 25%*. But with geopolitical backlash and rising costs, supply chains are diversifying fast. Long-term winners from this trend could be:
The demand for memory to support data processing in real time, vehicle-to-vehicle communication, internet connection and other functions will only increase.
Autonomous driving
AI data centres
Edge computing/ the IoT
Memory
Memory chips have driven new technologies from PCs in the 00s to smartphones and servers today. In the future they will be essential to huge growth areas.
The industry has consolidated massively to just three major conglomerates, two of which are
EM-based: South Korea’s Samsung and SK Hynix.
Samsung alone accounts for almost
of Vietnam’s exports. Apple plans to start producing macbooks in the country.*
20%
vietnam
india
malaysia
China is an EV superpower, with the largest EV manufacturer in the world BYD and the world’s largest EV consumer market. Future growth will be driven by...
Electric Vehicles
Over 60% of passenger vehicle sales must be zero emission vehicles by 2030, rising to 100% by 2038 to meet net zero targets.*
Today EVs are around
of cars on the road globally.*
1.5%-2%
an EV superpower
Growing global presence
Rising EV penetration
Over the long term the structural picture in EM is set to change enormously. Taking advantage
of these macro shifts will take depth of knowledge and a range of approaches. See how Federated Hermes' range of emerging markets solutions provides the flexibility to invest in EM.
Find out more
China is a world leader in solar and energy storage tech. This gives it huge economies of scale as these industries grow.
India has a unique public digital infrastructure.
The digital identification system (Aadhaar) can be a catalyst for broader digital initiatives.
As billions of industrial Internet of Things devices connect to the cloud, areas such as factory automation, smart cities, healthcare and oil and gas will all boost demand.
At present India accounts for only
of global goods exports, despite its vast potential workforce. Samsung and Foxconn have jumped at the opportunity to assemble phones in India.*
1.9%
BYD has plants in Japan, the US, Hungary and Brazil, and is constructing or planning plants in Thailand and France.
We expect EV penetration in China to continue growing from today’s 28% level for the foreseeable future.*
Malaysia benefits from its unique position of having a sizeable Chinese and English language-speaking population, and its key role in the manufacturing supply chain for semiconductors and electronics.
AI data centres are extremely hungry for computing power. As data centres grow, demand for storage will increase exponentially.
The number of unicorns - start-ups with a $1bn valuation - topped 100 in 2022.*
Rising geopolitical tensions means critical technologies are more localised - presenting exciting investment opportunities
in chip design, manufacturing
and software.
What’s driving change?
Shaping the way
China is an EV superpower, with the world’s largest consumer market and EV manufacturer, BYD. South Korea's LG Energy Solutions is a leading battery manufacturer, whose products are likely to remain at the heart of the EV revolution.
*Source: Global Emerging Markets Outlook 2023.
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For professional investors only. The value of investments and income from them may go down as well as up, and you may not get back the original amount invested. Investments in emerging markets tend to be more volatile than those in mature markets and the value of an investment can move sharply down or up.
Renewable technologies
Key themes
of Vietnam’s exports. Apple plans to start producing macbooks in the country.*
Samsung alone accounts for almost
of global goods exports, despite its vast potential workforce. Samsung and Foxconn have jumped at the opportunity to assemble phones in India.*
At present India accounts for only