Political unrest, battery technology, disruption in banking and ESG analysis...

Global Emerging Markets portfolio manager, Paul Desoisa, reports back from his research trip to Indonesia and Korea in Q4 2019



During my research trip to Seoul, I witnessed a huge political protest take place on the streets of the city, and as the waves of protestors passed by, I spoke to several local people about their view of the current government. President Moon Jae-in's approval rating has fallen from over 80%, when he entered office in 2017, to a current approval rating of below 40%1. Interestingly, the main subject of the protest focused on the attempt by Moon to ease the country’s relationship with North Korea, but clearly this is far from a unanimously supported policy.

One of the great things about conducting this on-the-ground research, is hearing the range of different opinions. I’ve returned to Edinburgh with a more developed understanding of the current political landscape in Korea.

Battery technology

One industry where Korea leads the globe is battery technology, where it has some of the world's leading intellectual property. This intellectual property has become extremely valuable as the automotive industry transitions towards an electric vehicle and hybrid market.

During my week in Korea, I met some of the world's leading battery manufacturers: LG Chem, Samsung SDI and SK Innovation. We expect the electric vehicle and hybrid market to grow rapidly over the next couple of decades, and this can already be seen by the size of LG Chem's order backlog, which currently stands at over 100 billion US dollars. This is one of the fastest and largest growing markets available to investors, and emerging market companies are leading the world in the race for battery technology.


Disruption in banking

A big topic of conversation throughout my time in Indonesia was how the country’s leading banks remain relevant to their clients. Given the size of the opportunity to offer a range of financial and non-financial products to a population of over 260 million people, we are seeing the entry and expansion of several internet companies with their ‘Super Apps’ in the Indonesian economy.

Motorcyclists wearing green jackets and helmets can be seen weaving across the city. These motorcyclists are working for either a company called Grab or Gojek, which are just a couple of the ‘Super Apps’ present in Indonesia. These companies are offering more than just transportation services that we are most familiar with via Uber. There are a range of services available such as food delivery services, hotel booking services, health services and a digital payment wallet. Importantly, we expect them to increase their presence in the financial system by offering loans to their customers on their platform. Alongside the already present digital payment wallet, this is another direct form of potential disruption for the existing banks. The key discussion point with the banks is how do they take advantage of this opportunity, and not become disrupted by this rapidly changing landscape?

ESG engagements

With every company during my trip, I engaged on material ESG issues, with the aim of developing the long-term sustainability of the businesses. This has been particularly fruitful in the banking industry, where the Indonesian banking industry has room for improvement with regards to sustainable financing. I discussed and demonstrated what best practice looks like in the global industry, and we will continue to work with these companies develop their policies. The openness of these management teams to engage with investors is another reminder of the willingness of emerging market companies to reform and improve their ESG credentials.

The consistency of our engagement, on behalf of our clients, ensures that we maintain our industry leading credentials, which can be demonstrated by our AAA plus rating by the PRI.


Important information

This information is issued and approved by Martin Currie Investment Management Limited (‘MCIM’). It does not constitute investment advice.

Market and currency movements may cause the capital value of shares, and the income from them, to fall as well as rise and you may get back less than you invested.
The opinions contained in this document are those of the named manager(s). They may not necessarily represent the views of other Martin Currie managers, strategies or funds.
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