Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 253

Five reasons why emerging markets lead tech

Emerging markets are at the forefront of global technology growth. Many emerging market tech companies are the most innovative and fastest growing in the world, driven by young, increasingly affluent and tech-savvy populations. The MSCI Emerging Market Index now has the largest technology weighting of any global index, with its share rising from 13% at the end of 2010 to 28% by the end of January 2018.

Here are five key reasons why emerging markets leads the tech revolution:

1. Huge appetite for tech

The sheer size of populations in emerging markets is itself an opportunity. While internet-user growth has been blistering, there’s still plenty of room for expansion. China’s 730 million online population is larger than that of the European Union and US combined but represents only half of the country.

A significant percentage of the ‘unconnected’ in China and other emerging markets like India, Brazil and Russia are urban dwellers (see chart below), which means they can be added relatively fast and cheaply. The youthful demographic profiles of many emerging markets are a real tailwind for technology, given faster adoption and creativity that characterises younger generations.

2. Power of the mobile phone

A large proportion of the population in emerging markets is accessing the internet via smartphones, and this has spurred phenomenal innovation. China’s Tencent, for example, has built a whole content-driven social-networking ecosystem through mobile internet. This includes e-finance, e-commerce, ad-platforms, online-to-offline services, travel and mobile gaming – effectively making it a Facebook, PayPal, WhatsApp, and Amazon all rolled into one. US companies may have spearheaded personal computer internet services, but emerging market tech firms are leading the mobile internet revolution.

3. Taking the lead in FinTech

FinTech – the fusion of finance and technology – is a prime example of an area where emerging markets are outpacing their developed counterparts by some margin. This is assisted in no small measure by the mobile revolution, but also broader efforts to improve financial inclusion. Whether it be money transfer & payments, savings & investments, insurance or borrowing, emerging markets exhibit more enthusiastic use of FinTech than elsewhere.

Emerging market financial institutions have also been quick to embrace technology, making them world leaders in the use of electronic distribution channels. The bank with the largest Twitter following in the world is not of developed-world provenance, but India’s Yes Bank.

4. Governments are on board

Emerging market governments are keen to use technology to increase efficiencies and reduce cost. What’s more, demographic pressures have forced governments to focus on their young and increasingly affluent populations. This rise in income and social mobility is most starkly illustrated in Asia, where the Brookings Institute estimates that over two billion people will join the middle class by 2030.

A focus on education and innovation has also helped some emerging markets steal a march on developed market competitors. In Bloomberg’s latest index of the world’s most innovative countries, South Korea again led the field, topping the international charts in Research & Development intensity, value-added manufacturing and patent activity, and with top-five rankings in high-tech density, higher education, and researcher concentration.

Source: Bloomberg, International Labour Organisation, International Monetary Fund, World Bank, Organisation for Economic Co-operation and Development, World International Property Organisation, Jan 2018.

5. Emerging market tech titans

Emerging markets today boast world-class technology firms in both the hardware and software space. Chinese names like e-commerce giants Alibaba and Tencent have built huge footprints domestically (note that in China, US tech giants like Facebook, Amazon, and Google are peripheral players in their respective areas of social media, e-commerce, and search engines).

Both Alibaba and Tencent are now extending their coverage across Asia. Armed with Asia-centric games, social networking, and e-commerce platforms, we believe they will give the formerly dominant US names very tough competition. Meanwhile, other emerging market tech firms, like colossus chip-maker Taiwan Semiconductor, are central players in global supply chains – providing components for major brands like Apple.

Emerging markets – the new destination for tech exposure

Rather than catching up, emerging markets are now taking the lead in a whole raft of different areas of technology. With plenty of untapped growth left, and the highest-quality firms widening their competitive moats, we believe this area presents some of the most attractive long-term opportunities for investors.

 

Kim Catechis is Head of Emerging Markets at Martin Currie, a Legg Mason affiliate. Legg Mason is a sponsor of Cuffelinks.

RELATED ARTICLES

The markets to gain most from US rate cuts

Is India the world's best growth story?

10 trends reshaping the future of emerging markets

banner

Most viewed in recent weeks

Which generation had it toughest?

Each generation believes its economic challenges were uniquely tough - but what does the data say? A closer look reveals a more nuanced, complex story behind the generational hardship debate. 

Maybe it’s time to consider taxing the family home

Australia could unlock smarter investment and greater equity by reforming housing tax concessions. Rethinking exemptions on the family home could benefit most Australians, especially renters and owners of modest homes.

The best way to get rich and retire early

This goes through the different options including shares, property and business ownership and declares a winner, as well as outlining the mindset needed to earn enough to never have to work again.

A perfect storm for housing affordability in Australia

Everyone has a theory as to why housing in Australia is so expensive. There are a lot of different factors at play, from skewed migration patterns to banking trends and housing's status as a national obsession.

Supercharging the ‘4% rule’ to ensure a richer retirement

The creator of the 4% rule for retirement withdrawals, Bill Bengen, has written a new book outlining fresh strategies to outlive your money, including holding fewer stocks in early retirement before increasing allocations.

Chinese steel - building a Sydney Harbour Bridge every 10 minutes

China's steel production, equivalent to building one Sydney Harbour Bridge every 10 minutes, has driven Australia's economic growth. With China's slowdown, what does this mean for Australia's economy and investments?

Latest Updates

Superannuation

Super crosses the retirement Rubicon

Australia's superannuation system faces a 'Rubicon' moment, a turning point where the focus is shifting from accumulation phase to retirement readiness, but unfortunately, many funds are not rising to the challenge.

Economy

Should Australia follow Trump's new brand of capitalism?

A new brand of capitalism may be emerging - one where governments take equity in private companies. Is it state overreach, or a smarter way to fund public goods without raising taxes?

Gold

Why gold may keep rising - and what could stop it

Central banks are buying, Asia’s investing, and gold’s going digital. The World Gold Council CEO reveals the structural shifts transforming the gold market - and the one economic wildcard that could change everything. 

Investment strategies

Fact, fiction and fission: The future of nuclear energy

Nuclear power is back in the spotlight, including in Australia. For investors exploring the sector, here are four key factors to consider in this evolving energy landscape. 

Taxation

The myth of Australia’s high corporate tax rate

Australia’s corporate tax rate is widely seen as a growth-killing burden. But for most local investors, it’s a mirage - erased by dividend imputation. So why is it still shaping national policy? 

Taxation

Should we change the company tax rate?

The headline 30% corporate tax rate masks a complex system of dividend imputation and franking credits that ensures Australian shareholders are taxed only once, challenging traditional measures of tax competitiveness. 

Investing

Noise cancelling for investors

A lot of the information at an investor's fingertips today has little long-term value. The modern investing greats are not united by access to faster information, but by their ability to filter out what doesn’t matter.

Sponsors

Alliances

© 2025 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.