EM to the core, Ep. 3/7 – The emerging markets consumer

The forces shaping the next five years may look very different from those of the recent past. The drive for greater resilience and the rise of AI are reshaping and rewiring supply chains, investment – and work itself. Robeco's annual Expected Returns publication sets out what this so-called 'Great Rewiring' could mean for the world economy, and for major asset classes.

Emerging markets are often viewed through the lens of geopolitics, growth and valuations. But for quantitative investors, another question matters just as much: how do systematic models need to evolve as markets change? In this episode, we explore why the asset class remains structurally under-owned, and how innovation in signals, data and portfolio construction can help navigate a more concentrated, more complex investment landscape.

Investors in EM equities may worry they're doubling up by investing in EM debt. That isn't the case though with EM bonds drawing on sovereign credit cycles and local currency dynamics that move independently from equities. The foundation has never been stronger with emerging market economies having recently navigated geopolitical shocks, inflation, and developed-market turbulence.

Emerging markets are anything but homogeneous: institutions, policy regimes, commodity exposure, governance standards and political risk vary. This dispersion is the opportunity set for true active managers to compound value.

The rotation into emerging markets is embryonic, with global investor portfolios still over-exposed to US assets. Realigning investments to better reflect the engines of global economic growth will take decades, not months and this trend is only just gaining momentum.

Stock markets have been dominated by the energy and AI themes, centered around a tech-dominated US market that some feel is over-priced. In the latest episode of our podcast series with Robeco's investors, Chris Hart, Portfolio Manager of Robeco Boston Partners Global Premium Equities, explains how he finds pockets of value all over the world.

Framing around emerging markets has typically focused on risk, but long‑term investors see mispriced opportunity. In this 'EM to the core' episode, portfolio manager Daniela da Costa shares how she looks through the geopolitical noise to focus on how different emerging markets are repositioning themselves in this new environment.

In episode 3 we focus on a key structural force: the emerging markets consumer. Karnail Sangha of Robeco's Emerging Markets Equity team discusses who these consumers are, how rising incomes and digital inclusion are transforming their spending patterns, and what sectors stand to benefit from this powerful, long‑term growth trend.

Emerging markets are now leading innovation in strategic sectors. In our new 'EM to the core' episode, Robeco's Jaap van der Hart explains how countries like China, Korea, Taiwan and India have become key to the supply chains in semiconductors, AI hardware, autos and renewable energy – and what that means for investors.

In the first episode of our new podcast series, portfolio manager Wim-Hein Pals discusses six factors that support the case for emerging markets equities. The relative discount of around 30% compared to developed markets is probably the most significant.