Healthcare, e-commerce, education, leisure and entertainment sectors from emerging markets will be the major investment themes in the year ahead.
That’s the view of Geoffrey Wong, head of global emerging markets and Asia Pacific equities at UBS Asset Management.
Speaking at the firm’s Market Outlook Press Briefing 2017 in Singapore, Wong said he sees an increasing focus on personal health in EMs.
‘Private expenditures on healthcare in countries like India, Vietnam, Indonesia, the Philippines and China have seen double-digit growth over the past few years and we believe that this growth will continue and broaden to other EM countries, which will provide plenty of investable opportunities in the process,’ he said.
On the other hand, Wong also said that at the same time, high incomes are leading to an increase in lifestyle-related conditions such as obesity and heart disease.
Furthermore, the rapid growth of online channels is another investable secular trend, according to Wong.
‘Internet penetration is already high in parts of EM, particularly Asia, but is below 50% in many EM countries. If internet access across EMs matures to developed market levels, we estimate this will translate into an additional two billion EM internet consumers.
‘Therefore, we believe e-commerce in EMs will continue to grow rapidly, and even accelerate as connectivity becomes more affordable via cheaper handsets, which potentially allow EM countries to completely leap-frog the expensive fixed line internet infrastructure investment of the developed world.’
Additionally, Wong said the online retail market in EM countries could exceed $2.5 trillion by 2025 as usage shifts from primarily social networking and gaming to more entrenched online shopping.
‘We have already witnessed the rise of several internet service juggernauts in China and Russia.
‘While these companies continue to grow, the next phase of growth and investment opportunities may be found in India and Southeast Asia.’
Eyeing Asia bonds
From a fixed income perspective, Hayden Briscoe, head of fixed income Asia Pacific at the firm, said what the US president-elect Donald Trump has done so far has not been too pleasant to bond investors, as he sent the US dollar skyrocketing already. However, Briscoe believes it is time to re-liberate the emerging markets.
‘We do not think the Trump effect is one of those long term trends that will upset EMs in a local currency sense.
‘So this is the time to start thinking of the countries that have got sound FX reserves, a sound fiscal position, unrelying on US dollars. And to use this sell-off as an opportunity to get back into the local markets.
‘We feel Asia is in a beneficiary position versus Latin America countries, where they are too reliant on US dollar funding to fund a lot of their corporates and a lot of their sovereigns.
‘You have already seen the way some of those countries come under pressure, Turkey for example. Asia just does not feel in that position right now.’