Emerging markets are moving back into focus as a broad and varied opportunity set, shaped by structural growth, improving policy conditions and valuations that remain attractive across much of the universe. For portfolios seeking exposure to areas of long-term economic development, the case rests on more than headline growth. It is also about access to companies, industries and supply chains that are increasingly central to the next phase of global progress.
Across the developing world, many economies are positioned at the centre of powerful long-term trends. These include the supply of critical commodities needed for the energy transition, the expansion of credit into underpenetrated markets and the rise of companies that are moving higher up the global value chain. Emerging markets are no longer simply a source of low-cost production or cyclical exposure. In many areas, they are home to businesses with deep domestic markets, export potential and a growing role in the technologies that are reshaping the global economy.
Innovation is an important part of this changing picture. Technological development in China, Korea and Taiwan is increasingly relevant to the same themes that have driven investor attention in developed markets, particularly artificial intelligence. Much of the value linked to AI may accrue not only to software platforms, but also to the hardware, semiconductor and broader technology supply chains based in emerging economies. This creates a wider range of potential beneficiaries and supports the case for a selective, research-driven approach.
Emerging markets can be more volatile than developed markets, and geopolitical issues require close scrutiny. However, the risk profile has changed in important ways. Many countries now have stronger fiscal positions, improved current-account balances and more meaningful foreign-exchange reserves than in previous cycles. Corporate governance has also improved in parts of the market, giving shareholders greater transparency and a clearer basis on which to assess business quality.
This combination of opportunity and risk places a premium on detailed local research. Fidelity’s emerging markets approach is built around being embedded in the regions where companies operate, meeting management teams, competitors and suppliers, and developing an on-the-ground understanding of domestic conditions. That depth of research can be particularly valuable in smaller and medium-sized companies, where analyst coverage is often thinner and mispricing can be more common.
Fidelity Emerging Markets Limited (LON:FEML) applies a flexible, go-anywhere approach across developing markets. The investment company seeks good quality businesses that benefit from long-term structural and cyclical trends, with an emphasis on dominant franchises, strong balance sheets and capable management teams. At the same time, it can also use short positions where analysis identifies weaker companies whose share prices may fall. This gives the strategy scope to draw on both positive and negative insights, while aiming to manage risk through changing market conditions.
Fidelity Emerging Markets Limited (LON:FEML) is an investment trust that aims to achieve long-term capital growth from an actively managed portfolio made up primarily of securities and financial instruments providing exposure to emerging markets companies, both listed and unlisted.
