Three key themes in Emerging Markets

Alastair Reynolds shares his thoughts on three important areas which are shaping investment in emerging markets.

Smart phones

  • We’ve seen a slowdown in 2017 and 2018 as phones have become a bit more expensive and penetration has increased to a point potentially close to saturation.
  • We expect demand to pick up as manufacturers bring innovations such as foldable phones to the market, prices are cut for some of the highest-end phones, and as we get into the renewal cycle in the phone sector.
  • This is a really interesting sector to keep an eye, creating opportunities in areas such as optical lenses for camera phones and memory chips.

Auto industry

  • This sector is going through great changes. We are at the tail end of a very long generation of internal combustion engines.
  • Car manufacturers are loath to move electric vehicles because they will make losses in the early stages. However, governments see electrically driven fleet as essential in lowering emissions
  • This will force the hand of the auto manufacturers.
  • We are looking at battery cell manufacturers, typically based in Korea, including names like LG Chemical and Samsung SDI.

China's clean up

  • Another trend we’re looking at in the portfolio is China’s attempt to make a cleaner environment.
  • China’s policy is to reduce its economy’s dependence on coal and is targeting natural gas – aiming to double its share in the fuel mix to 10% over the next three years.
  • One company which is right at the vanguard of this change is China Gas. The number of households being added to its network has now increased to five million households a year.

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.
The information provided should not be considered a recommendation to purchase or sell any particular security. It should not be assumed that any of the security transactions discussed here were or will prove to be profitable.

Risk warnings - Investors should also be aware of the following risk factors which may be applicable to the strategy.
Investing in foreign markets introduces a risk where adverse movements in currency exchange rates could result in a decrease in the value of your investment.
Emerging markets or less developed countries may face more political, economic or structural challenges than developed countries. Accordingly, investment in emerging markets is generally characterised by higher levels of risk than investment in fully developed markets.
This strategy may hold a limited number of investments. If one of these investments falls in value this can have a greater impact on the portfolio’s value than if it held a larger number of investments.
Smaller companies may be riskier and their shares may be less liquid than larger companies, meaning that their share price may be more volatile.
The strategy may invest in derivatives (Low Exercise Price Warrants, Index futures and FX forwards) to obtain, increase or reduce exposure to underlying assets. The use of derivatives may restrict potential gains and may result in greater fluctuations of returns for the portfolio. Certain types of derivatives may become difficult to purchase or sell in such market conditions.