The way to think about emerging markets is changing and oftentimes people don’t fully realize that. It used to be that [the] emerging market was the factory to the world. It’s where they made cheap stuff for the developed markets. But that’s changing.
Even in the developed world, we’re seeing that the importance of intangible assets are rising as we shift towards a knowledge-based economy. Now, that’s actually also true in the emerging markets. In fact, in some sense, it is even more true that they are ahead of the developed markets in some sense. And we call these emerging markets “leapfroggers.”
In the case of online retailing penetration or online banking penetration or digital payment penetration, China is already ahead of the United States. We think that trend is likely to continue. And you want to be exposed to the winners.
I think one of the really exciting developments for global investors is the availability of China A-shares. The China A-share market is still highly dominated by local retail investors. And as a result, it is still very inefficient. So professional managers should be able to capitalize on that. Now, typically, when you have inefficient markets, they tend to have very little liquidity and we can’t really invest in them. But this is a unique scenario where the market is still inefficient but there is a lot of liquidity, so we can deploy a lot of capital. And there are a lot of really interesting, attractive companies that have become investable now.
We find interesting and well-run businesses everywhere across the emerging world. In particular, I would highlight India. China gets all the air time [so] that perhaps people tend to forget about the second largest emerging market economy out there—which is India, which also offers a really diverse set of companies.
It used to be that finding data and information was an important part of the investment process because that was difficult to do. In today’s world, data is ubiquitous. Information is everywhere. That’s not a precious commodity anywhere anymore. And perhaps one of the most precious commodities today is patience. And I believe that investors should really be focusing much more on patience.
