Economic diversification, favorable demographics and better economic and monetary policies have improved both the breadth and quality of emerging markets (EM)1 opportunities.


Strong Companies, Improving Economies

EM companies are making their mark on the global business stage. Ninety-eight of the world’s 500 largest companies are now based in the developing world; that’s more than four times the number in 1999.2

Economic drivers in the developing world have also changed significantly. Highly cyclical sectors like Materials and Energy once dominated the index. Now, Technology, Consumer Staples and Financials make up the majority of the MSCI Emerging Markets Index.3


MSCI Emerging Markets Index Sector Exposure (%)
MSCI Emerging Markets Index Sector Exposure (%)

Sources: FactSet and Martin Currie. 2008 data is as of 1/1/08. 2018 data is as of 12/31/18. Consumer includes Consumer Discretionary and Consumer Staples. Other includes Industrials, Utilities, Health Care and Real Estate.


Rapid Economic Growth

Growing urban populations, rapid adoption of digital technology and an expanded range of trading partners are major tailwinds for growth. GDP in developing countries is now expected to grow more than twice as fast as that of advanced economies in the five years ahead.4
 

Projected GDP growth, 2019-2023
Projected GDP growth, 2019-2023

Source: International Monetary Fund, World Economic Outlook Database, October 2018.

Over 90% of citizens in India are biometrically registered
Over 90% of citizens in India are biometrically registered

Source: UIDAI as of December 31, 2018.


Stronger Earnings Growth

This healthy economic outlook provides a supportive backdrop for earnings. While return on equity (ROE)5 for EM companies is close to that for developed world companies, price-to-book (P/B)5 valuations—typically used rather than price-to-earnings to assess EM companies given variations in local accounting regulations and practices—remain low relative to history and to developed markets, providing a timely investment opportunity.


Attractive market valuations5

Source: Bloomberg, as of March 31, 2019. Past performance is no guarantee of future results. Indexes are unmanaged, and not available for direct investment. Index returns do not include fees or sales charges. This information is provided for illustrative purposes only and does not reflect the performance of an actual investment.


A Sector Made for Active Managers

EM offers active managers a far larger and more diverse pool of prospective investments than the S&P 5006. The MSCI EM index, for example, covers 24 different countries with divergent business cycles, opening the door for active managers with the flexibility to be selective about where and when to invest. What’s more, EM is not as widely covered by analysts as developed markets – and an active, bottom-up stock selection process may uncover long-term opportunities not fully recognized by the broad market.

1 Emerging markets 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. Developed markets refers to countries that have sound, well-established economies and are therefore thought to offer safer, more stable investment opportunities than developing markets.

2 Source: Bloomberg, as of 4/3/19. At the end of 1999 there 23 EM companies in Bloomberg’s top 500 global companies ranked by market capitalization. As of 4/3/19, there were 98.

3 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.

4 Source: International Monetary Fund, World Economic Outlook, October 2018. Developed economies or developed markets refers to countries that have sound, well-established economies and are therefore thought to offer safer, more stable investment opportunities than developing markets.

5 The MSCI World Index is an unmanaged index of common stocks of companies representative of the market structure of 22 developed market countries in North America, Europe and the Asia/Pacific Region. The price-to-book (P/B) ratio is a stock's price divided by the stock’s per share book value. Return on equity (ROE) is the amount of net income returned as a percentage of shareholders equity. Return on equity measures a corporation's profitability by revealing how much profit a company generates with the money shareholders have invested.

6 The S&P 500 Index is an unmanaged index of 500 stocks that is generally representative of the performance of larger companies in the U.S. As of 3/31/19, the MSCI Emerging Markets Index had 1,136 constituent companies compared with 505 for the S&P 500.

 

Connect with Emerging Markets Growth Potential


The Martin Currie Emerging Markets strategy seeks long-term capital appreciation through high-conviction portfolios that invest in emerging market companies across geographies and sectors. Available as both a fund and separately managed account, the strategy embeds Environmental, Social and Governance analysis into the investment process.

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IMPORTANT INFORMATION
: Past performance is no guarantee of future results. All investments involve risk, including loss of principal. Please see each product’s web page for specific details regarding investment objective, risks, performance and other important information. Review this information carefully before you make any investment decision. Additional share classes and products may be available. 

Indexes are unmanaged, and not available for direct investment. Index returns do not include fees or sales charges.

The opinions and views expressed herein are not intended to be relied upon as a prediction or forecast of actual future events or performance, or a guarantee of future results, or investment advice.

Active management does not ensure gains or protect against market declines.

Equity securities are subject to price fluctuation and possible loss of principal.

International investments are subject to special risks, including currency fluctuations and social, economic and political uncertainties, which could increase volatility. These risks are magnified in emerging markets.

Diversification does not assure a profit or protect against market loss.

Forecasts are inherently limited and should not be relied upon as indicators of actual or future performance.