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This is a chapter from the Emerging markets: An evolving landscape paper. To read all chapters in this paper, click here.

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Global leadership from emerging market (EM) technology companies will be instrumental in driving the growth of the asset class

  • EM technology companies have experienced significant growth, evolving the shape of the asset class—it is now the dominant sector in EMs.
  • The growth in the sector has been driven by high quality companies delivering earnings growth.
  • Consensus earnings growth expectations for EM technology remain high, with more attractive growth and valuations compared to nearest competitors—US technology.
  • The volume of innovation should support further growth in EM technology compared to other regions.

Technology has grown to be the dominant sector in EM.

Technology represents almost a quarter of the MSCI EM Index. It has almost doubled in size since 2010 due to its positive performance and has been the best performing sector over the long term.1 This is reflective of the broader change in the shape of the asset class over the past 15 years. EMs are no longer dominated by commodities and cyclicals – the asset class has global technology leaders that offer innovative products and services, as well as domestic companies which are capitalising on enhancements in digitisation.

Technology in EMs has gone from strength to strength. It has evolved to be the most dominant sector in the index by consistently delivering on earnings. Compared to a decade ago, its index weight has doubled so now its relative contribution to index performance is even more impactful than before. The sector is composed of high-quality companies with stronger earnings growth expectations and more attractive valuations than its nearest peers—the US technology industry. We think this valuation gap versus the US can close. We believe EM technology will continue to compound its high returns and growth and achieve the valuation which is reflective of its global leadership. This global recognition of EM technology’s leadership and the companies’ delivery of earnings growth is what can turn the tide for EM as a whole, helping to navigate towards an exciting future.

Endnote

  1. Source: FactSet, as of 30 June 2024.

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