Emerging market trends: what's driving the 2024 economy?

Emerging markets (EM) have consistently been at the forefront of global economic growth, offering investors both opportunities and challenges. In 2024, these markets continue to be pivotal players, navigating the complex landscape of geopolitical shifts, technological advancements, and evolving consumer behaviors. As we delve into the second half of the year, it’s essential to focus on the key sectors and stocks that are likely to dominate the EM landscape, offering valuable insights for investors.

A new decade, a new opportunity 🔄

In recent years, EM equities have underperformed compared to developed markets, leading many investors to reconsider their exposure. However, 2024 presents a renewed opportunity, driven by a convergence of factors that are expected to reignite growth. With the MSCI Emerging Markets Index showing a year-to-date growth of 8% as of Q2 2024, the stage is set for a stronger performance in the latter half of the year.

Key sectors to watch include technology, consumer goods, and renewable energy. For instance, semiconductor companies like TSMC in Taiwan and Samsung Electronics in South Korea are well-positioned to benefit from the ongoing global demand for advanced chips, which are critical for everything from smartphones to electric vehicles. In the consumer goods sector, companies like Hindustan Unilever in India are expected to capitalize on the rising middle class and increased consumer spending. Renewable energy firms, particularly those focused on solar and wind power in China and Brazil, are also poised for growth as governments continue to invest in green infrastructure.

The rise of technological innovation ⚡

Technological innovation is one of the driving forces behind the resurgence of EM. Unlike developed markets, emerging economies often have the advantage of leapfrogging older technologies, allowing for rapid adoption and implementation of cutting-edge solutions. The tech sector in EM is expected to grow by over 12% in 2024, with significant investments pouring into AI, fintech, and e-commerce.

In India, Infosys and Tata Consultancy Services (TCS) are leading the charge in AI and digital transformation services, both domestically and internationally. Meanwhile, Brazil's Nubank, a fintech company, is revolutionizing financial services by providing accessible banking solutions to underserved populations. The rapid expansion of e-commerce platforms like MercadoLibre in Latin America highlights the growing importance of digital marketplaces in these regions.

Sustainable growth and urbanization 📊

Urbanization continues to be a major trend across EM, with two-thirds of the global population expected to live in cities by 2030. This shift is driving demand for infrastructure development, sustainable transportation, and smart city initiatives. In 2024, investment in urban infrastructure is projected to grow by 15% in EM, with a focus on sustainable and resilient solutions.

For instance, China’s commitment to achieving carbon neutrality by 2060 is pushing investments in renewable energy and green urban projects. The country’s solar panel production, already accounting for over 90% of the global supply, is expected to increase by 20% this year. Brazil's push for renewable energy, particularly in hydropower and wind energy, is also noteworthy, with the government setting a target to generate 45% of its energy from renewable sources by 2030. This makes companies like CPFL Energia and EDP Renováveis key players to watch.

Sector-specific insights for investors 🌐

• Technology: Focus on companies involved in semiconductor manufacturing, AI, and digital services, such as TSMC, Samsung Electronics, and Infosys.
• Consumer Goods: Companies like Hindustan Unilever and MercadoLibre are expected to benefit from rising consumer spending and digital adoption.
• Renewable Energy: Key players include CPFL Energia in Brazil and LONGi Green Energy in China, both of which are poised to capitalize on the global shift towards sustainable energy.

Geopolitical shifts and trade dynamics 💼

The geopolitical landscape remains a critical factor influencing EM in 2024. The ongoing U.S.-China trade tensions, coupled with the rise of regional alliances, are reshaping global supply chains. Countries like Vietnam, Mexico, and India are emerging as key beneficiaries of the 'China Plus One' strategy, where companies diversify their manufacturing bases beyond China.

Vietnam, for example, has seen a surge in manufacturing investments, particularly in the electronics and textile sectors. Companies like Foxconn and Samsung have significantly expanded their operations in Vietnam, making it a crucial hub for electronics manufacturing. Similarly, India’s Reliance Industries is poised to benefit from the country’s focus on self-reliance and the expansion of its industrial base.

Conclusion 📈

The outlook for emerging markets in 2024 is characterized by a mix of promising opportunities and complex challenges. Sectors such as technology, consumer goods, and renewable energy are expected to lead the charge, driven by demographic trends, technological advancements, and strategic investments. However, investors must also navigate the macroeconomic vulnerabilities and geopolitical shifts that continue to shape these markets. 

By focusing on specific sectors and companies poised for growth, investors can position themselves to capitalize on the next wave of EM development. The time is now right to increase exposure to emerging markets, as they embark on a transformative journey toward sustained growth and global influence.