Structural Change in Emerging Markets: 4 Key Forces to Understand (Wellington Management)

Key points

We believe:

• Economic development is generating four forces of structural change across emerging markets (EMs): greater inclusiveness, enhanced productivity, improved living standards and better sustainability.
• Countries that make progress towards economic development offer more fertile environments for investing.
• Traditional EM indexes are underexposed to the forces of structural change.
• An unconstrained, thematic approach can offer targeted access to development opportunities.

THE TAILWIND OF ABOVE-TREND GROWTH SHAPED THE EM INVESTMENT ENVIRONMENT OVER THE PAST 20 YEARS. This growth advantage has begun to fade; we suspect it will not return to the same extent in the near future. Instead, a change in policy priorities, together with an environment of slower but steadier growth, is creating different investment opportunities from those that characterised the last cycle. The Wellington research agenda is focused on trying to understand this transition and its investment implications. This paper isolates four key forces of structural change across EMs, and offers a framework for translating these structural changes into potentially attractive investment themes. READ MORE

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