Release Date: 31 Dec 2024. By Michael Walsh, Executive Director
As 2024 draws to a close, I have spent time during the holidays researching the latest public posts, trend analyses, and utilizing AI tools to assess the global economy emerging markets and the performance of their ETF’s (Exchange Traded Funds). The data indicates that several regions are positioning themselves as future economic powerhouses. These insights examine the potential of India, Southeast Asia, Mexico, the Middle East, and Africa, highlighting potential investment opportunities and structural trends based on PBEC’s historical access to trade policy recommendations and its unique position in APAC convening regional business leaders on a regular basis to listen to their opinions and insights.
India’s Digital Revolution
India is on the verge of a remarkable transformation all things remaining equal. By 2030, the nation is projected to welcome 350 million new middle-class consumers, surpassing the entire population of the United States. India is bypassing traditional development stages, leveraging new technologies to propel itself into a new era of economic growth.
Key Highlights:
- Population: 1.4 billion
- Smartphone Users: 800 million
- Internet Users: 750 million
- Digital Payments: Home to some of the world’s largest digital payment systems
Possible Investment Opportunities:
- $INDA – India’s top 85 companies
- $INDY – India’s infrastructure boom
- $INDL – 2x leverage on India’s growth
Areas of Growth:
- Digital Payments: A burgeoning sector.
- Mobile Internet: Rapid adoption changing the landscape.
- Financial Services: A revolution in accessibility and innovation.
India isn’t without its social historical fabric make-up, corruption and structural issues that will continue to hinder progress and frustrate, but overall the fundamentals look promising for this burgeoning economy.
Southeast Asia’s Silent Rise
ASEAN has emerged as the world’s 5th largest economy and is poised to become the 4th largest by 2030, driven by favorable demographics and economic shifts.
Key Highlights:
- Young Population: Average age of 30.
- Rising Middle Class: Significant consumer growth.
- Manufacturing Shift: Moving from China.
- Digital Economy Boom: Rapid digitalization.
Possible Investment Opportunities:
- $ASEA – Southeast Asia ETF
- $EWS – Singapore (financial hub)
- $IDX – Indonesia’s emergence
Why it’s a huge opportunity:
- 700M people
- 350M digital consumers
- $1T digital economy by 2030
ASEAN as a bloc moves slowly when it comes to adopting integration cross border policies and one thing to note is the increasing internal competition between ASEAN nations for supremacy in certain sectors of manufacturing, attracting DFI and energy generation. Ongoing corruption in particular in the infrastructure sector, protectionism and monetary/currency restrictive policies for investors are things to watch out for.
Mexico’s Manufacturing Explosion
Mexico is becoming a major player in global manufacturing, driven by the near-shoring trend and a favorable economic environment.
Key Highlights:
- Young Workforce: Supporting industrial growth.
- Trade Agreements: With over 50 countries.
- Geographical Advantage: Borders with the USA; connects transpacific trade by air and sea.
- Competitive Energy Costs: Cheaper than many Asian counterparts.
Investment Opportunities:
- $EWW – Mexico’s broad market
- $FLMX – FTSE Mexico focus
- $MEXC – Mexico consumer growth
Major US firms like Tesla ($TSLA), Apple ($AAPL), and Boeing ($BA) are all expanding operations there.
Mexico enjoys being a consolidation hub for both air cargo and shipping transshipments distribution within Latin America and into North America. However, under the second term of President Trump’s presidency, significant tariffs on sectors that have been growing the fastest in Mexico are threatened which could curtail continued DFI attractiveness in the coming 2-3 years. Higher inflation risk is also a factor that could potentially cause imbalance to society and affect domestic consumer sentiment and the cost of labor.
Middle East 2.0
The Gulf region is undergoing significant transformation as countries like Saudi Arabia and the UAE invest heavily to diversify their economies beyond oil.
Key Highlights:
- Investment: $3.5 trillion in diversification projects.
- Emerging Tech Hubs: Growth in innovation and infrastructure.
- Green Energy Initiatives: Mega-projects taking shape.
- Tourism Expansion: Shifting economic focus.
Investment Opportunities:
- $UAE – UAE markets
- $KSA – Saudi transformation
- $GULF – Broad Gulf exposure
Saudi Arabia and the UAE are the leading economies driving DFI demand currently within the GCC, but don’t discount other petro-states and LNG producing nations like Kuwait, Oman and Qatar. All are vying for attracting overseas investors and visitors. IFC’s and tourism are key drivers. The renewed trade linkages between GCC and Asia under FTA’s and with China seeking new trading partners is an area to watch as well as those traditional trading outpost cities along the silk road. Many are now increasingly connected by air transport and new rail links built and invested in by Chinese SOE’s.
Africa’s Leapfrog Moment
Africa’s potential is immense, characterized by its young population and rapid urbanization.
Key Highlights:
- Youngest Global Population: A demographic dividend.
- Fast Urbanization: Driving economic activity.
- Mobile-First Economy: Adoption of technology.
Key Markets:
- Nigeria: Largest economy in Africa.
- Kenya: Emerging tech hub.
- Egypt: Strategic gateway to the continent.
- South Africa: Most developed market.
Investment Opportunities:
- $AFK – Pan-Africa exposure
- $NGE – Nigeria growth
- $EZA – South Africa play
The continent of Africa has long suffered from a perception problem and has been widely misunderstood especially over the past decade in how its services sector has emerged in the main with its own unique characteristics and entrepreneurial spirit. There are the traditional commodities and mineral exports as well as the inbound tourism sector, but it’s the maturity of domestic consumption, capacity building via digital education access and the adoption of new technologies to tackle inherent past bureaucratic issues, like digital payments that is transforming many sectors. Many African business leaders have increasing confidence to go outbound and seek partnerships and invest on a global scale. Engagement with business associations at a country level is one way to build your network.
Three Industry Sectors You Can’t Afford to Ignore in 2025:
- Semiconductors
Every piece of modern tech needs chips, but only two companies can make the most advanced ones. The VanEck Semiconductor ETF ($SMH) is leading the way, but $ASML has a 100% monopoly on the machines needed to make advanced chips.
The Leaders:
-
- ETF: $SMH (VanEck Semiconductor)
- $ASML: 100% monopoly in chip equipment
- $NVDA: 80% AI chip market share
- $TSM: Makes 90% of advanced chips
- Healthcare Tech
Focusing on medical devices, this sector is protected by regulations and benefits from an aging population.
ETF: $IHI (iShares Medical Devices)
The Leaders:
-
- $ISRG: Surgical robots, massive moat
- $VEEV: 80% life sciences CRM share
- $SYK: Orthopedic robotics leader
- Cloud & Cybersecurity
Companies invest heavily in cybersecurity due to the risks of hacking. This sector boasts high profit margins and sticky revenue.
ETF recommendation: $IGV (iShares Tech-Software)
Leaders:
-
- $MSFT: Azure cloud growing 30%+/yr
- $DDOG: Used by 25% of Fortune 500
- $FTNT: 635k+ global customers
Common Threads
High barriers, steady profits, and resilience against disruption are key characteristics of these sectors.
Investment Strategy
For investors, consider the following strategy:
- 30-50% in index funds
- 20-40% in targeted sectors
- Remainder in cash/opportunities (e.g., individual stocks, crypto)
Investment Principles
For those considering investments in these markets, here are some guiding principles:
- Start Small: Begin with 5% positions, scaling up over time.
- Use Dollar-Cost Averaging: Mitigate volatility.
- Risk Management: Utilize ETFs for broad exposure and consider currency hedging.
- Diversification: Spread investments across regions.
Timeline Considerations
- Long-Term Focus: Think in terms of 5-10 years.
- Ignore Short-Term Noise: Stay focused on structural trends.
- Monitor Valuations: Evaluate compelling opportunities.
In Conclusion
The transformations occurring in these regions present significant investment opportunities. As institutional money flows and the landscape shifts, those who recognize potential early may reap substantial rewards. However, we must remain vigilant about geopolitical volatility and other unforeseen events that can affect market conditions. It is crucial to maintain a long-term perspective and seek professional advice.
2024 was not just another year in markets; it was a masterclass in adaptation. The winners were not merely those who predicted correctly but those who adapted fastest. Remember this as we move into 2025.
Happy New Year! Wishing 2025 to be a healthy and prosperous year for all readers, and thank you for your support in 2024!
Disclaimer
This insights piece is prepared by the Pacific Basin Economic Council (PBEC) and authored by Michael Walsh, Executive Director. The information presented herein is for informational purposes only and reflects the opinions of the author. PBEC is not a licensed financial advisor, nor does it act as an investment vehicle. This document should not be construed as a recommendation or solicitation to buy or sell any securities or financial instruments.
Investing in financial markets involves substantial risk, and individuals should seek independent professional advice before making any investment decisions. PBEC expressly disclaims any liability for any direct, indirect, or consequential damages arising from the use of this information. Past performance is not indicative of future results. Please invest responsibly and conduct your own due diligence.