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September 09, 2014 at 09:20 PM
The ongoing transition toward consumption-driven economics that several emerging markets across the globe are currently undergoing has become a favorite theme for many investors.
Being able to leverage that dynamic to its fullest potential, though, means looking beyond the “broad based definition of consumption that’s limited to the consumer staples and consumer discretionary sectors,” says Jose Morales, chief investment officer of Mirae Asset Global Investments and portfolio manager of the $100 million Mirae Emerging Markets Great Consumer Fund.
Consumption is a multi-faceted process that has multiple elements to it, Morales believes, and those investors who can peel apart the layers and understand the varied drivers of consumption as they continue to change in different emerging markets will fare the best.
“We like to draw an analogy to what we see happening in the emerging markets now to what we saw with the Baby Boomers in the U.S.,” Morales said. “The Baby Boomers became the U.S. middle class and what you saw with them was not just increased consumption but also a change in consumption patterns – what they were and where they were buying it both changed.”
That same dynamic is happening in many emerging markets today, giving rise to a host of companies in sectors that offer goods and services catering toward changing tastes. Ecommerce is booming, for instance, and there’s a rising demand for things like healthcare and financial services, as “more people want to take better care of themselves and buy homes,” Morales said. Increasing disposable income means that more people can and want to travel, he said, so emerging market airline stocks are an interesting consideration.
