Even the most experienced investors' portfolios often tend to be under-exposed to emerging markets despite clear indicators signaling strong economic growth. Why? Home country bias often causes investors to favor domestic stocks over foreign companies, leaving an investor blind spot when it comes to international exposure, specifically in emerging and frontier markets.
Despite the fact that EM accounted for 50% of global GDP in 2023, money managers and individual investors are still overlooking a massive opportunity. This relative growth advantage becomes even more dramatic when you zoom into the internet sectors as these countries continue to rapidly digitize their economies.
Source: FactSet, Haver, IMF, Global Financial Data, eVestment, Morningstar, EPFR, MSIM calculations. As of Dec. 31, 2020.
“In general, we think the logical answer to “how much” to invest in emerging markets is more.”
-Morgan Stanley
EM GDP Growth Outpaces Developed Markets
According to the IMF, GDP growth for 2024 in Emerging markets and developing economies will be a whopping 4.2%, more than double that of advanced economies (1.7%). India, in particular, has been a stand-out leader within the EM sector, with the IMF recently speeding up the timeline for the country to surpass Japan and Germany becoming the third-largest economy in the world.
The United Nations recently raised India’s 2024 GDP projection to 6.9%, demonstrating what we believe to be the biggest growth opportunity in emerging markets today.
However, home-country bias tends to get even worse the deeper you go, with just a fraction of investors having pure-play exposure to India’s soaring growth.
India is Under-represented
INQQ, FMQQ and EMQQ are targeted tools to help investors gain intelligent exposure to the companies best positioned to benefit from the rapid digitization and modernization of the developing world.