Investing opportunities in emerging markets

Matt Scherer, CFA

March 01, 2021

The emerging market landscape is evolving and there is now a broader set of potential opportunities available for investors.

Many developing nations are undergoing significant fundamental changes. Economies that were once dominated by agriculture and low-cost manufacturing are now shifting away from low-cost labor-intensive industries to higher-paying service-oriented ones.

As emerging markets economies transition to more sophisticated industries, better jobs are created and more people within the country have an opportunity to rise out of poverty. As a result of this shift, the nation’s income per capita rises and a marketplace full of middle class participants emerges with an appetite for new products and services.

Three reasons why you should consider investing in emerging markets:

  1. Emerging markets growth potential.
    Developing nations generally have higher GDP growth rates than developed markets, which means emerging markets will likely occupy a larger share of the world’s economy over time.
  2. The rise of the emerging markets middle class.
    Historically, a growing middle class has been a positive side effect of economic growth. And one of the most powerful investment themes in emerging markets right now is the continued emergence of the middle class in some of the most populated countries in the world.
  3. As incomes rise, spending patterns change.
    When incomes rise, consumers are able to spend beyond their basic needs. Today, emerging markets consumers are spending a larger percentage of their income on discretionary goods and services including education, health care, entertainment and travel.

Emerging markets represent some of the best growth opportunities for investors that often aren’t found in more developed economies. But with those opportunities, comes risk. To learn more about investing in emerging markets, contact your CIBC Private Wealth advisor.

This video was extracted from our Around the world virtual event experience: On location in Chiapas, Mexico , hosted on February 7, 2021. For information on how you can participate in our next event, please reach out to a member of your CIBC Private Wealth team.

Matt Scherer is a portfolio manager and equities analyst for CIBC Private Wealth Management.