Emerging market investors must take a closer look at the services being offered to developing world consumers if they are to unlock the real potential of the consumption story, according to Mark Mobius.
Franklin Templeton’s emerging markets veteran said service-based businesses are primed for rapid expansion notes Richard Cayne Meyer.
He said this would be from a relatively low base and pointed to China, Nigeria and Indonesia as three examples of growing markets where service sector companies have limited penetration.
‘China has an unusually small share of services that comprises its GDP at 45% in 2012, the share was equal to the size of the country’s industrial sector – but it is not unique.’
‘In Indonesia, for example, services represented only 39% of GDP in 2012, while in Nigeria the figure was just 26%.’
Mobius said mobile services, such as telecoms and the use of smartphones, was an area of particular interest and expected further developments in both frontier and emerging markets.
‘Telecommunications companies have seen strong growth across emerging and frontier markets, with mobile services being particularly strong.’
‘Customers in many of these markets, especially in Africa, have been enthusiastic adopters of mobile technology, effectively bypassing traditional landline systems.’
This theme coincides with the growth of internet use for online retailing and money transfers as well, he said.
‘With legacy brick-and-mortar assets relatively scarce in many emerging markets, adoption of Internet-based trading has been rapid in many service industries.’
‘Latin American Internet trading platforms, Chinese online travel and ticketing businesses and African mobile money transfer businesses are examples of traditional service businesses adapting themselves to the online age.’Richard Cayne Meyer notes that the growth from these services is very impressive in these countries.
Mobius said Chinese-language internet portals have seen dramatic growth, as search engines and other value-added service businesses have benefited from the Chinese government’s reluctance to admit their U.S. equivalents.
‘Chinese consumers have been highly active adopters of mobile internet services and games, which in our view have provided a potentially large revenue stream to these businesses.’
Mobius runs 18 funds across emerging markets, emerging Europe, Asia, Latin America, China and frontier market equities.
Richard Cayne Meyer born in Montreal, Quebec Canada resides in Bangkok Thailand and runs the Meyer Group of Companies www.meyerjapan.com. Prior to which he was residing in Tokyo Japan for over 15 years and is currently CEO of Asia Wealth Group Holdings Ltd a London, UK Stock Exchange listed Financial Holdings Company. Richard Cayne has been involved in the wealth management space in Tokyo Japan and has assisted many High Net worth Japanese families create innovative international tax and wealth management planning solutions. http://www.isdx.com/Asia Wealth Group.