The last ten years in emerging markets has seen a variety of very major changes in the composition of the asset class. We think those are best viewed through a country lens. The emerging market country universe continues to be characterised by economic booms and busts.
Ten years ago, Brazil was at the end of an economic boom, it then went through the worst economic downturn in 100 years and saw its role in the asset class decline through 2015 and 2016 and is now recovering again. We’ve seen that in other markets, as well.
Over the longer term, economic and technological development does come through in financial markets, and over the last ten years, we’ve really seen the rise of China. Now, the last two years has been very difficult for investors in China. We’ve been very defensively positioned within an under-weight position in China. But over ten years, the rise of the Chinese consumer and technology sector is there to see in the composition of the asset class.
And then, thirdly, politics and geopolitics really comes through. Ten years ago, Russia was a major emerging market. Because of politics and geopolitics, it’s now been removed from the Index of Investable Countries.
Also, ten years ago, there were some major Chinese state-owned enterprises, like China Mobile and CNOOC. They were some of the biggest companies in emerging markets. Again, those have been sanctioned and are un-investable.
In other emerging economies, politics has either driven countries to be much bigger, like Saudi Arabia and Kuwait, or to be removed from the index, like Argentina and Pakistan.