Urs shares the current outlook for emerging markets, the key strengths of the team, and importantly how this benefits our investors. More
China is an innovation hub
Internet-enabled cookers and palm-sized drones were just two innovative products we saw on our trips to the Chinese manufacturing hubs of Shenzhen, Suzhou and Hangzhou. These innovations, plus Chinese firms' commitment to R&D, prove that 'Made in China' now means high-tech, locally developed products. If, as is likely, this commitment to innovation continues, we will see more companies from China rising to be global industry leaders in the near future.
Emerging market consumers are trading up
As incomes rise, emerging market consumers are willing to pay more and are trading up for better quality products. That's the message we got when we visited home appliance makers and electronics stores in China, where consumers are demanding more advanced and higher-spec products as they shift to premium brands. And we saw this demand not just with white goods, but also across automobile, cosmetic and food and beverage industries in emerging markets.
Cashless payments are growing
Demonetisation in India and retail modernisation in China both say a lot about the growth of cashless payments. Indian journalists and shopkeepers told us the 2016 demonetisation policy shifted businesses and individuals to non-cash transactions and payment digitisation. In China, we saw malls and restaurants replacing cash with mobile payments, creating monetisation opportunities for payment companies and propelling total cashless transactions of USD 11.8bn between January and October 20171.
India's farming is modernising and reforming
Farms with advanced irrigation and greenhouses demonstrate how Indian farming is modernising. This means that professional, large-scale farming companies should see growth as the sector rationalises and moves away from small-scale operations. As the sector modernises and responds to growing consumer demand, it's likely that the local market for inputs like tractors, irrigation pumps, and solar power panels will expand too.
These are just some of the insights we have collected over the years. These insights are particularly valuable as they allow us to position our portfolios for the future, even when trends and phenomena are not wholly understood by the street.
With much that is still misunderstood about emerging markets and significant transformations still to come, we expect our 'boots-on-the-ground' approach to continue giving us an edge in the future.
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The emerging markets financial sector offers many growth opportunities, but what are they? How are fintech, digitization and mobile payments driving growth in the banking sectors of China and India? More