Emerging markets hold growing appeal amid US-China rivalry

According to the CEO and founder of one of the world's largest independent financial advisory, asset management and fintech organisations, the heightening US-China rivalry is fuelling international investors' interest in emerging markets.

The analysis from Nigel Green of deVere comes as the company reports a "global surge in enquiries" over the last year about these markets from its predominantly high-net-worth clients.

He comments: "The intensifying rivalry between the US and China has significant implications for global markets. 

"While this rivalry creates uncertainties and challenges, it also presents opportunities, particularly in emerging markets. 

"Our consultants around the world have experienced a significant surge in interest from international investors about these dynamic economies as they seek diversification, growth potential, and reduced exposure to geopolitical tensions."

The soaring demand from global investors about increasing their exposure to emerging market opportunities comes as tensions rooted in a combination of economic, geopolitical, and ideological factors between the world's two largest economies and major superpowers continue to make international headlines.

"The economic dimension is a fundamental aspect of the rivalry. China's rapid rise as a global economic powerhouse and its pursuit of industrial policies that include state subsidies, intellectual property concerns, and market access restrictions have generated tensions with the United States," explains Nigel Green. 

"The US accuses China of unfair trade practices, intellectual property theft, and a lack of reciprocity in market access."

The rising rivalry also stems from competing geopolitical ambitions. China's increasing assertiveness in the South China Sea, its Belt and Road Initiative (BRI) aimed at expanding its global influence through infrastructure projects, and its military modernisation have raised concerns among US policymakers. 

"The US sees China's rising influence as a challenge to its own status as a global superpower."

Technological competition is a critical aspect of the rivalry. The deVere chief executive notes: "Both countries are vying for dominance in emerging technologies like 5G, artificial intelligence, quantum computing, and advanced manufacturing. 

"The US has expressed concerns over China's strategic acquisition of technology, intellectual property theft, and forced technology transfer, leading to initiatives like export controls, investment restrictions, and heightened scrutiny of Chinese tech companies."

National security considerations also play a significant role in the rivalry, with the US viewing China's military upgrades, cyber espionage activities, and perceived threats to its allies and partners in the Asia-Pacific region as potential challenges to its strategic interests.

One of the key reasons international investors find emerging markets attractive during the US-China rivalry is diversification. 

"The rivalry between these two economic giants often generates volatility in global markets, making it sensible for investors to seek alternative investment destinations. Emerging markets provide precisely that,' affirms Nigel Green.

"By increasing exposure to these economies, investors can reduce their dependency on the performance and fluctuations of US and Chinese markets and, therefore, spread risk across a broader range of regions and industries."

In addition, emerging markets offer vast growth potential, driven by factors such as expanding populations, rising middle-class populations, and increasing urbanisation.

"These countries present investment opportunities in sectors such as tech, infrastructure, healthcare, and renewable energy – where significant growth opportunities are happening."

The CEO also emphasises that "non-aligned" economies are also piquing interest among global investors.

"As the rivalry between the US and China escalates, non-aligned states emerge as safe havens, relatively insulated from the direct impact of the tensions," observes Nigel Green. 

"With stable political environments and lower exposure to global power struggles, frontier markets offered investors a degree of stability and reduced risk associated with the US-China rivalry."

The Association of Southeast Asian Nations (ASEAN) member states, such as Indonesia, Malaysia, Thailand, and Vietnam, are often viewed as non-aligned or neutral in the US-China rivalry.

Several countries in the Middle East, such as Saudi Arabia, the United Arab Emirates, and Qatar, can also be considered non-aligned markets.

Similarly, African nations, including Nigeria, Kenya, and Ethiopia, and Central and Eastern European ones, such as Poland, Hungary, and the Czech Republic.

He concludes: "It's our experience that investors are increasingly involved in geopolitical hedging. 

"These dynamic economies provide avenues to navigate the changing global landscape and capitalise on the potential rewards that emerge amid the ongoing and heightening rivalry."

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