Emerging markets, defined by MSCI as 46 countries including China, India, Southeast Asia, Latin America, and Africa, have largely been a disappointment for investors over the last 15 years, with negative returns. This is due in part to the traditional index being filled with state-owned enterprises, or government-owned banks and oil companies, which are often inefficient and susceptible to corruption. However, Kevin Carter, founder of EMQQ, believes that the growth opportunity in emerging markets lies in the emerging market consumer. Rather than focusing on state-owned enterprises, Kevin’s strategy is to invest in the emerging market consumer through technology companies, such as the Craigslist of China or the Amazon of Brazil. He argues that these companies will benefit from the increasing consumption as people want more and better food, clothing, appliances, education, and leisure activities.
Zooming out, this all makes sense if you can suspend your worldview for a moment.
Why can’t the rest of the world go through what the West has enjoyed for around 50 years?
Perhaps a growing middle class in emerging markets will lead to a shift in consumption from basic necessities to discretionary items, driving further the growth in these technology companies?
Like so many people I’ve spoken to over the past 9 months, there’s a growing sense of ‘unease’ around environmental, social, and governance (ESG) investing. During the podcast Kevin actually marvels at the fact oil extraction companies have a better ESG score than a tech ETF (Exchange Traded Fund) like his operating in emerging markets. ESG-based investment themes are something to watch though in 2023, as with a few other ‘trends’ that have potentially trending too far, get exposed to a bit more sunlight.
I’ve never really thought too deeply about emerging markets I must confess, but as a new world power challenges the US, with new financial systems, more capable AI, and big business / big government partnerships, perhaps this needs to change?
P.S: Please note:
-Emerging markets carry a variety of risks, including stock market corrections, regulatory and government actions, headline risk, war, and the inability to trade securities. These risks can lead to significant volatility in investment returns, as seen in the 80% decline experienced by EMQQ in the last 18-20 months. However, these risks can also present opportunities for long-term investors, who can take advantage of fluctuations through the power of compounding. The longer your timeframe, the more appropriate it may be to take on board this type of risk but do seek advice for your situation, and do your own due diligence from a variety of sources (*This is not financial advice*).
-I am personally invested in EMQQ but in no way am I suggesting this is best ETF covering emerging markets for you.
-Chat GPT has assisted with approximately 70-80% of this article!