“This is where taking an active approach and doing your homework really pays off. When we first started to invest and see a lot of opportunities within health care, particularly in China, the sector was only about two percent of the MSCI EM index and now just around five percent.”
4. Digital payments
Valeria Vine on the rise of digital payments: “With our increased reliance on technology for work and recreation, the pandemic largely brought about a change in habits. Shopping went online, theatres and cinemas became gaming and Netflix, meeting people was now done over social media. This shift was reflected in the growing use of digital wallets. People who had never tried it before were suddenly very willing to give it a go. With the steady return to pre-pandemic normality, it is unlikely that people who have formed these convenient habits will revert back to old habits. This is a long growth trend, which has received a significant boost from the pandemic with a lot of interesting companies coming to market during this time period as well.”
Victor Kohn adds: “These trends had started before the pandemic, but they were greatly accelerated with Covid-19. One example is dLocal, which recently went public. Based in Uruguay, they facilitate payments in 29 countries for multinational companies such as Microsoft, Netflix, Spotify, etc. They have their own fraud models so that they can maximise the acceptance rates from clients, very strong technology, and a client centric culture. They helped to solve the problem for companies which expanded rapidly during the pandemic.”
5. India
Victor Kohn: “India is a very exciting place and the country is at a much earlier stage of development than China. However, it is rapidly growing. It has a young and very entrepreneurial population. The availability of smartphones and the internet is right now exploding in India. With an expanding middle class, the number of households with incomes greater than thirty thousand dollars is expected to double over the next decade. Since coming to power, its current government has implemented a number of reforms to modernise the economy. This hasn’t always been easy to implement. India is a liberal democracy and so some reforms, even those viewed most positively by the investment community, have encountered some resistance. Some have sparked protest, and the recent farm reforms are a good example of that.”
“India is interesting because there are macro reforms and there are micro reforms, and you can see this if you look at the World Bank’s ranking of ease of doing business that is published every year. In 2015, India was in number 142. By 2020, India had climbed to number 63. This metric of ease of doing business is a pretty good predictor of future economic performance. India’s government has been trying to solve issues such as resolving insolvencies through regulation. For example, in 2016, the average resolution of an insolvency was over four years. Now it is less than one year. Of course this is a delicate balancing act which the government tries to, on the one hand, attract investment and promote development while at the same time protecting domestic players and, of course, keeping their popular support.”
