Quote · Excess Returns
Finding Quality Growth in Emerging Markets with Ian Smith
Where this was said
Intro
At 2:40 · chapter starts 0:00
Ian Smith explains why EM is not a homogeneous trade, covering the two distinct opportunity sets — AI supply chain leaders and domestic consumption S-curves — and notes EM's cheap valuation vs MSCI World. [1] — Ian Smith "Emerging markets span vastly different income levels, growth drivers, and political risks. Korea and Taiwan are high-income AI supply chain…" 02:30
Technology now represents over 40% of the MSCI Emerging Markets index, making AI capex the dominant driver of EM performance.
Emerging market equities were broadly in the doldrums from 2010 until very recently, representing over 15 years of underperformance relative to US stocks.
Emerging markets span vastly different income levels, growth drivers, and political risks. Korea and Taiwan are high-income AI supply chain plays; India is a domestic demand story; LATAM sits in between. Lumping them together misses the opportunity.
EM offers two distinct opportunity sets: world-leading companies embedded in structural trends like the AI supply chain, defense, and power equipment; and domestic demand plays in underpenetrated markets riding S-shaped consumption curves.
