Traditionally it was the influence of commodities which dictated the ebb and flow of stock prices in emerging markets, while in the west the power of the dot com boom and the subsequent tech trends of the digital era held sway.
In recent years this has changed significantly, and technology now plays a key role in emerging markets as major new powers in this industry appear to rival their incumbent counterparts in North America and Europe.
So what has caused this role-reversal and what options do investors have if they want to take advantage of the fresh tech-based opportunities that are appearing in emerging markets today?
If you live in a western nation then it is all too easy to assume that the digital services that we take for granted are similarly dominant in every corner of the planet, especially if you have used a stock API to track their upwards trajectories in recent years. However, while search engines like Google and e-commerce sites like Amazon may rule the roost in places where Latinate languages are the norm, elsewhere these platforms found it hard to get a foothold.
This left room for grass roots tech firms to emerge in the years following the turn of the millennium, catering specifically to the markets that exist outside of the western bubble.
China provides the most compelling example of this, with the rise of the Alibaba Group to its current heights being indicative of just how much tech has changed things in emerging Asian markets. Likewise Tencent, a Chinese company founded just a year before Alibaba, has enjoyed a similarly meteoric ascent.
These businesses are not just making money hand over fist in areas such as online shopping and interactive entertainment; they are also building brands which are amongst the most valuable worldwide.
Such a state of affairs has put western competitors on the back foot, while eager investors have seized upon this titanic tech push that has made emerging markets less susceptible to the kinds of fluctuations that were inevitable prior to this boom.
Indeed it was Alibaba’s listing on the Hong Kong stock exchange that was one of the landmark events of 2019, generating $13 billion and convincing analysts that there was still a lot of headroom for growth going forwards.
Disruption in other areas
It may seem like China is taking the lead as the emerging market in which tech matters most at the moment, but it is far from the only place where the influence of digital services is being felt from a stocks perspective.
India has also seen significant changes in this arena as well, not just because of outside investment from western corporations but also thanks to home-grown companies hitting big in the tech sector.
Software development is becoming more important to the Indian economy at the moment, with hundreds of companies springing up in the past half-decade. It is the prevalence of smartphone use in India that is particularly conducive to the proliferation of app developers, since the nation’s fixed line networking infrastructure is less well developed than in other regions and so catering to mobile users makes more sense.
Of course India, like China, is not just a place where tech firms spring up to meet the demands of the domestic market; many of the stalwarts of its tech scene are selling products and services to North American and European customers and clients.
Tech from these emerging markets has been having a disruptive effect internationally in recent years and looks set to continue to do so as the tools of modern commerce and communication help to break down the geographical boundaries that used to stifle innovation and limit investment options.