An expanding middle class in emerging markets seeks improved lifestyle
Emerging markets have evolved into key sources of global growth, in part because they hold the dominant
share of the world’s population. Billions of new consumers are entering the world’s economy and driving
the consumption of goods and services. We see evidence of this growing consumer culture focused on
“new economy” opportunities across key emerging markets. Those include China, with new demand for a
wide range of consumer services, and India, with its reform-minded leaders focused on restructuring the
economy and improving infrastructure.
Investable Theme in Action: Ivy Emerging Markets Equity Fund
Jonas Krumplys, CFA, and Aditya Kapoor, CFA, portfolio managers of Ivy Emerging Markets Equity Fund, believe
there is growing demand from emerging market consumers for “new economy” goods and services.
A closer look at the Ivy Emerging Markets Equity Fund
Below are three examples of stocks that we believe may benefit from a “new economy” trend.
- MercadoLibre is the leading e-commerce and
fintech platform in Latin America. In general,
it is seeking to do in Latin America what
Alibaba has done in China: Build a leading
e-commerce platform and leverage that
success into a payments and fintech platform.
- MercadoLibre has built a strong foundation
over two decades for an internet platform
in Latin America. The region is considered
an attractive opportunity for e-commerce
growth, with retail penetration at only 5%.
The company has an estimated 25% market
share now and is adding services for online
shoppers to spur growth.
- The firm recently offered free shipping to
fend off competitors like Amazon and has
added a payment platform, MercadoPago,
which includes point-of-sale and merchant
- We estimate MercadoLibre can continue at its
current high growth rates for the next decade.
Taiwan Semiconductor (2330:TT)
- Taiwan Semiconductor engages in
manufacturing, selling, packaging and
computer-aided design of integrated circuits
and other semiconductor devices.
- Taiwan Semiconductor is a leading
semiconductor maker with annual revenue
growth that has averaged more than 14% for
the last five years.
- The company is diversifying revenue streams
into new market segments, including lighting
- The company reflects the growing
demand and rising discretionary income
of consumers in China who are seeking
services and technology that reflect a move
toward a “new economy” and the growth in
Ping An Insurance (2318:HK)
- Ping An is the first integrated financial
services conglomerate in China that blends
its core insurance operations into securities
brokerage, trust and investment, asset
management and corporate pension business.
The company provides financial services for
approximately 47 million individual clients and
2 million corporate clients.
- Opportunity to leverage the firm’s position as
the world’s second-largest insurer, behind only
Berkshire Hathaway Inc., into other product
offerings and services.
- The company utilizes five key technologies
biometrics, big data, artificial intelligence,
blockchain and cloud computing — in an effort
to conduct business in a cost-efficient manner.
- Potential for increased market share through
the company’s integrated financial business
model, which seeks “one customer, multiple
products and one-stop services.”
Past performance is not a guarantee of future results. The opinions expressed are those of the Fund’s portfolio managers and are not meant as investment advice or to predict or project the future performance
of any investment product. The opinions are current through Dec. 31, 2018, are subject to change based on market conditions or other factors, and no forecasts can be guaranteed. The holdings discussed are for
illustrative purposes only and are not intended as a recommendation to purchase, sell, or hold any specific security or to engage in any investment strategy.
MercadoLibre, 2.48%; Taiwan Semiconductor Manufacturing Co. Ltd., 6.31%; Ping An Insurance, 2.05% of net assets as of 09/30/2018.
Risk factors: The value of the Fund’s shares will change, and you could lose money on your investment. International investing involves additional risks, including currency fluctuations, political or economic conditions
affecting the foreign country, and differences in accounting standards and foreign regulations. These risks are magnified in emerging markets. Investments in countries with emerging economies or securities markets
may carry greater risk than investments in more developed countries. Political and economic structures in many such countries may be undergoing significant evolution and rapid development, and such countries
may lack the social, political and economic stability characteristics of more developed countries. Investments in securities issued in these countries may be more volatile and less liquid than securities issued in more
developed countries. These and other risks are more fully described in the Fund’s prospectus. Not all funds or fund classes may be offered at all broker/dealers.