Asia is the core of growth, rising consumption, and innovation within emerging markets, and now represents over 75% of the MSCI Emerging Markets Index*. Urban consumers and world class industry leaders in innovation have changed the game of investing and make it increasingly important for global investors to consider a core allocation to emerging markets.
Going forward, we believe that the traditional international allocation and global emerging markets deserves a rethink.
Most advisors get exposure to China through a broad emerging market mandate. But that exposure is typically weighted to large-cap companies and what my guest today would call “stagnant, old economy” sectors such as financials. In response, many are rethinking their approach to investing in China in order to access the drivers of growth and market expansion.
The emerging markets (“EM”) equity asset class has evolved considerably over the past decade such that many active EM equity managers may find it challenging to create long-term alpha over the benchmark. Countries such as China and India are moving to the fore, historical drivers of growth are changing and technology, innovation and health care are becoming a larger part of the opportunity set. It has been difficult for EM investment teams to keep up with these changes. My guest today, David Dali, wrote those words in a recent commentary, and we discuss how he and his team are positioning to adapt to that changing landscape.
Matthews Asia Portfolio Strategist David Dali discusses the new drivers of growth in emerging markets.