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.
We’ve gathered data from Aksjebloggen.com to identify 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?
Upstart titans
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.
Containing the Coronavirus: Chinese Lessons
By Dan Steinbock
Despite containment in China, international response against the coronavirus has been lagging. So, what can be learned from the Chinese experience?
As the novel coronavirus is globalizing, the very nature of the outbreak – which the World Health Organization (WHO) has now declared a global pandemic – is changing.
As the early imported cases are now being augmented with local transmissions, the novel coronavirus outbreak has moved into a new, more serious phase. That’s why March will be the critical month worldwide.
International virus escalation
During the first week of February, I projected the turnaround in the outbreak; that is, deceleration of cases in China and acceleration of cases outside China. At the time, the number of the infected in the Chinese mainland was still below 30,000 and outside China less than 300.
Some observers, even “market experts,” thought that was the end of the story, whereas those with greater foresight understood it was just the tip of the iceberg.
Although relative infection rates were already increasing internationally, too many international observers saw the virus as “China’s problem.” In the coming months, that flawed misperception will prove very costly in terms of human lives and economic damage.
As confirmed cases in China now exceed 80,000, those outside China are climbing closer to that level. In China, the turnaround came about 1 month after the first recorded cases. Outside China, the early cases were first reported after mid-January, but there has been no turnaround. Instead, international escalation is rapidly intensifying (Figure).
Figure Daily new cases in and outside China
Source: WHO, China National Health Commission, Difference Group
Chinese containment
Facing a previously unknown virus, China rolled out what the WHO later called “perhaps the most ambitious, agile and aggressive disease containment effort in history.” Here’s how it worked.
1. Aggressive containment in three phases
The strategy that underpinned the Chinese containment effort started as a national approach, which pushed hard for universal temperature monitoring, masking, and hand washing. When China initiated the quarantine of tens of millions, it was a drastic measure amid a drastic crisis. But at the time, all alternatives were worse.
As the outbreak evolved, deepened and spread, more knowledge was gained. That’s when China took a science and risk-based approach to tailor the implementation.
Finally, specific containment measures were adjusted to the provincial, county and even community context, the capacity of the setting, and the nature of novel coronavirus transmission there.
2. Leadership and solidarity
It was the deep commitment of the Chinese people to collective action, which was devised and implemented by the Chinese leaders, that made possible broad containment and its enforcement – but not just at the national level.
Critically, remarkable solidarity was achieved in provinces and cities in support of the most vulnerable populations and communities. Effective at national, provincial and municipal levels, it was a lesson about the power of collective solidarity and multi-level governance cooperation, as opposed to disunity and friction.
What impressed many international observers who visited China at the time was the simple fact that, despite ongoing outbreaks in their own areas, Chinese governors and mayors continued to send thousands of health care workers and tons of vital personal protection equipment supplies into Wuhan, the epicenter of the crisis, and its surrounding province Hubei. In the battle against the coronavirus, we are only as strong as our weakest links.
3. Resolute determination
It was this bold approach to contain the rapid spread of the novel respiratory pathogen that changed the course of the rapidly escalating epidemic. What seemed to be a crushing plague-like disaster that would first spread through Hubei across China, then through Asia and the rest of the world was subdued in weeks.
As WHO’s executives like to point out, when their mission first arrived in China, there were almost 2,500 newly confirmed cases daily. Two weeks later, when they left, the number of new cases had shrunk to barely 400 – to less than a fifth.
Here’s why it’s so impressive: Outside China, the number of daily new cases was also about 2,500 by March 3. Today, that figure is not falling but soaring – and almost four times higher.
So, that’s the Chinese approach in a nutshell: Try to contain the crisis aggressively in phases. Foster leadership, bolster solidarity. Act decisively and with determination.
It sounds easy but it’s not. And no approach is devoid of mistakes; but what really matters is how quickly one can learn from those mistakes.
People before GDP
When Italy on March 9 imposed a national quarantine over some 60 million people, it has the potential to delay the spread and reduce the number of the infected in Italy and Europe, and internationally. If that costly decision had not been made, the repercussions would have been disastrous to Italy, Europe and the world.
It was also a lesson from China. When Beijing imposed the cordon sanitaire around Wuhan and neighboring municipalities on January 23, 2020, it was criticized in much of the West as a reflection of “Beijing’s autocratic measures” that would not help but could make the crisis a lot worse.
In reality, the quarantine and all the accompanying measures dramatically delayed and reduced further exportation of the coronavirus to elsewhere in the country, regional proximity and worldwide. That’s why the Chinese blueprint is now adapted elsewhere, when alternatives are few and rare.
Every country can learn from the Chinese experience, but all must also adjust those lessons to local conditions. Not every country is in a comparable situation, but no country can any longer avert a virus impact.
In China, economic development is seen as critical to the country’s future. But ultimately, Chinese leaders are not accountable to cold GDP figures. People come first.
It is thanks to that mindset that China is now busy getting back to business, working to bolster the economy with accommodative monetary and fiscal policies, while reopening schools and trying to contain the remaining chains of transmission. As the populous country is moving from containment to the mitigation stage, the real challenge will be to contain new imported cases in the borders, while quickly extinguishing any potential new virus cluster at home.
There are no miracle cures against dangerous viruses. But some lessons are better than others. This is neither the first nor the last global pandemic. We can’t afford to learn too slowly.
About the Author