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Dear
Reader,
Part one
of the SIC 2017 highlights series detailed some concerns about the future of
the US economy.
But the
SIC wasn’t a bearish gathering... many speakers were very optimistic on the
future of emerging markets.
This
chart, detailing the rise of China and India over the last four decades,
popped up more than once:
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With major economic developments now
happening in both nations, they will likely play an increasingly larger role
in the world going forward.
And given
that when America’s share of global GDP increased by 50%, its share of world
stock market cap rose 240%, this move has massive investment implications.
Here are
four bullish trends for emerging markets that were covered in-depth at the
SIC 2017.
One
Belt, One Road
Dubbed
“the new Silk Road,” One Belt, One Road aims to create the world’s largest
platform for economic cooperation between China and the rest of the world.
It's an
infrastructure project unlike anything we have ever seen.
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As founder and CIO of Morgan Creek Capital
Management Mark Yusko quipped,
“One Belt, One Road, Multiple Bull Markets.”
China’s
Middle Class
The
American consumer is still the driver of the global economy, but that baton
will likely be passed to China’s middle class sometime this century.
According
to McKinsey, in 2000, just 4% of China’s urban population was considered
middle class. By 2020, 76% will be... a 19-fold increase. And with more
spending power comes greater consumption.
Boston
Consulting Group projects China’s total consumption will increase by 55% to
$6.5 trillion by 2020. That’s
more than the UK, Germany, and France combined.
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India’s Banks
A massive
barrier to growth in India has been the number of non-performing loans in its
banking system, which have risen fourfold since 2009.
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Much was made of President Modi’s move to
demonetize the country in December.
However,
outlawing 85% of the currency in circulation did achieve something very
important—it recapitalized India’s banks. Since demonetization, over $80
billion has flowed into the banking system.
Aadhaar/India
Stack
Raoul
Pal—author and publisher of The
Global Macro Investor, an elite macroeconomic and investment
research service—promised his presentation would blow our minds... and he
delivered.
In 2009,
half of India’s population didn’t have any form of identification... which
made it extremely hard to get a bank account, insurance, or even a driver’s
license. To fix this problem, the government created a system called Aadhaar.
Aadhaar
is a biometric database that gives users a digital proof of identity... and
the best part is: This
identity can be authenticated by finger prints and retina scans.
Then last
year, India created India Stack.
In
Raoul’s words:
India
Stack is a series of secured and connected systems that allows people to
store and share personal data such as addresses, bank statements, medical
records, employment records, and tax filings and it enables the digital
signing of documents.
Using India
Stack, you can open a bank account, mobile phone account, brokerage account,
or share medical records at any hospital or clinic in India with your fingerprints or by retina
scan...
The rise
of China and India present major opportunities for astute investors...
And
despite growing at twice the speed of the US, the stock markets of China and
India trade at a big discount to developed markets today.
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