The future of tech is in emerging markets

Today’s emerging markets lie at the forefront of the latest technological developments, from mobile banking and shopping to robotics, autonomous vehicles, health care and more. 

This technological transformation has not only made things like shopping and banking easier, it has spread into nearly every facet of our lives. In health care, emerging-market innovations are attracting the attention of companies and providers in developed countries where costs are escalating. According to a 2014 PwC study, more than 59 per cent of patients living in emerging markets used at least one mobile health application or service, compared with 35 per cent in the developed world.

As of 2016, China, India, the United States, Brazil and Japan represented the largest internet user base in the world, respectively, with 1.72 billion in total2. The three emerging markets within the list command a total of 1.32 billion users3. That means 1.32 billion users have access to goods, services and information. As such, we think e-commerce is still very much a penetration growth story, resonating in several markets as consumers increasingly use multiple devices for online transactions.

Technological Leapfrogging

Often, developing countries can capitalise on technology more quickly than more advanced countries. A technological “leapfrogging” enables the adoption of new technologies that bypass legacy models or systems. For example, some countries in Africa quickly embraced mobile payment systems without ever building brick-and-mortar bank branches.

The supercomputers’ arms race used to be an American-Japanese rivalry. Although it was late to join the race, China now is sitting at the very top of the list with the world’s most powerful supercomputer, which ran a simulation of the creation of space and time in just over an hour4. What’s even more impressive, this powerful computer runs on Chinese-made microprocessors.

Emerging markets are quickly automating their factories, accounting for a quarter of the world’s industrial robotics demand5.

Technology is also shaping the automobile industry, introducing new trends such as electric vehicles and automated driving systems. Decades ago, the United States and Japan were the world’s leading automobile producers. Today, China is the world’s largest auto producer and is at the forefront of the autonomous vehicle race. There have been several Chinese partnerships over the past few years in the areas of autonomous driving software. Component manufacturers are also joining this trend as we see new mobility as a long-term theme.

Self-driving vehicles are one of the key sectors in the Chinese government’s 'Made in China 2025' initiative, which encourages collaboration between Chinese technology companies in all aspects of development. In December 2017, the Beijing Municipal Transport Commission granted approval for testing self-driving vehicles under certain conditions.

The Story’s Just Starting 

For us, the story is just starting and I believe these trends will continue. Developed markets were at the forefront of new innovations but this is no longer the case. As such, the technology sector provides us with many interesting and compelling opportunities, from hardware to software to various forms of e-commerce and entertainment.

Chetan Sehgal is lead portfolio manager at Templeton Emerging Market Trust (TEMIT).

-The risks and rewards of investing in Latin America

Keep up to date with all the latest financial news and investment tips by signing up to our newsletter. Email subscribers will also receive a free print copy of Money Observer magazine.   

Subscribe to Money Observer Magazine

Be the first to receive expert investment news and analysis of shares, funds, regions and strategies we expect to deliver top returns, plus free access to the digital issues on your desktop or via the Money Observer App.

Subscribe now

Add new comment