An expanding middle class in emerging markets seeks improved lifestyle
Emerging markets are evolving 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.
- Tencent is the dominant Chinese internet
platform and has steadily expanded its
market. The company’s leading online
gaming (mobile and PC based), social
media and online wallet offerings are just
some of the draws for its user base.
- Tencent is only beginning its monetization
of ad placements.
- Its strong balance sheet and free cash flow
generation allow for venture investing on a
global basis, and these have strengthened
its ties to customers.
Taiwan Semiconductor (2330:TT)
- Engages in manufacturing, selling, packaging
and computer-aided design of integrated
circuits and other semiconductor devices.
- A leading semiconductor maker.
- Annual revenue growth has averaged more
than 16% for the last five years.
- Diversifying revenue streams into new market
segments including lighting and solar.
- 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 mobile technology.
Largan Precision (3008 TT)
- Adoption of high end dual cameras for
smart phones is just starting. Only 20% of
iPhones had this feature in 2016 and forecast
to jump to over 50% this year. Non Apple
smart phones dual camera penetration was
in the mid single digits in 2016. The share is
forecast to rise to 25 to 30% of units in 2017.
- Largan has been capacity constrained;
forecast an increase in availability during
the second half of 2017.
- New planned features are sensing cameras
for augmented reality and periscope cameras
for optical zoom.
Past performance is not a guarantee of future results. The opinions expressed are those of the Fund’s portfolio manager and are not meant as investment advice or to predict or project the future performance
of any investment product. The opinions are current through September 30, 2017, 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.
Aditya Kapoor, CFA, was named a portfolio manager on the Fund in January 2017.
Tencent, 4.6%, Taiwan Semiconductor Manufacturing Co., 3.2%, Largan Precision, 1.7%, of net assets as of 09/30/2017.
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.
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