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

Australian house prices close in on world record

Sydney is set to become the world’s most expensive city for housing over the next 12 months, a new report shows. Our other major cities aren’t far behind unless there are major changes to improve housing affordability.

The case for the $3 million super tax

The Government's proposed tax has copped a lot of flack though I think it's a reasonable approach to improve the long-term sustainability of superannuation and the retirement income system. Here’s why.

Tariffs are a smokescreen to Trump's real endgame

Behind market volatility and tariff threats lies a deeper strategy. Trump’s real goal isn’t trade reform but managing America's massive debts, preserving bond market confidence, and preparing for potential QE.

The super tax and the defined benefits scandal

Australia's superannuation inequities date back to poor decisions made by Parliament two decades ago. If super for the wealthy needs resetting, so too does the defined benefits schemes for our public servants.

Meg on SMSFs: Withdrawing assets ahead of the $3m super tax

The super tax has caused an almighty scuffle, but for SMSFs impacted by the proposed tax, a big question remains: what should they do now? Here are ideas for those wanting to withdraw money from their SMSF.

Getting rich vs staying rich

Strategies to get rich versus stay rich are markedly different. Here is a look at the five main ways to get rich, including through work, business, investing and luck, as well as those that preserve wealth.

Latest Updates

SMSF strategies

Meg on SMSFs: Withdrawing assets ahead of the $3m super tax

The super tax has caused an almighty scuffle, but for SMSFs impacted by the proposed tax, a big question remains: what should they do now? Here are ideas for those wanting to withdraw money from their SMSF.

Superannuation

The huge cost of super tax concessions

The current net annual cost of superannuation tax subsidies is around $40 billion, growing to more than $110 billion by 2060. These subsidies have always been bad policy, representing a waste of taxpayers' money.

Planning

How to avoid inheritance fights

Inspired by the papal conclave, this explores how families can avoid post-death drama through honest conversations, better planning, and trial runs - so there are no surprises when it really matters.

Superannuation

Super contribution splitting

Super contribution splitting allows couples to divide before-tax contributions to super between spouses, maximizing savings. It’s not for everyone, but in the right circumstances, it can be a smart strategy worth exploring.

Economy

Trump vs Powell: Who will blink first?

The US economy faces an unprecedented clash in leadership styles, but the President and Fed Chair could both take a lesson from the other. Not least because the fiscal and monetary authorities need to work together.

Gold

Credit cuts, rising risks, and the case for gold

Shares trade at steep valuations despite higher risks of a recession. Amid doubts that a 60/40 portfolio can still provide enough protection through times of market stress, gold's record shines bright.

Investment strategies

Buffett acolyte warns passive investors of mediocre future returns

While Chris Bloomstan doesn't have the track record of his hero, it's impressive nonetheless. And he's recently warned that today has uncanny resemblances to the 1990s tech bubble and US returns are likely to be disappointing.

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.