Emerging Markets

With growing, increasingly affluent populations and innovative technologies, emerging markets offer opportunity for diversification, exposure to various stages of the economic cycle, and attractive valuations. 

The top five emerging market economies— Brazil, Russia, India, China and South Africa—are commonly referred to as the BRICS. Formalized in 2010 when these companies represented just 11% of global GDP, these countries have experienced tremendous growth since then, a trend that is expected to continue for the foreseeable future. The International Monetary Fund anticipates that by 2030, the BRICS nations will make up over 50% of global GDP. 

While the BRICS countries are enormously different in terms of economies, structures, and cultures, they all have large populations and promising futures. China and India, for example, have become major players in the technology sector. Brazil is the second largest food producer in the world, second only to the U.S. Russia and South Africa are home to rich natural resources. All are home to potential supply chains and new consumer markets.

Here’s what you should know about the world’s top emerging markets and how to invest in them. 

What Are the BRICS?

As mentioned, the BRICS countries include Brazil, Russia, India, China and South Africa.

Brazil has a GDP of $1.868 trillion, making it the eighth-largest economy in the world. The country is also a member of Mercosur, a South American free trade area that includes Argentina, Brazil, Paraguay and Uruguay, which is home to three quarters of the total economic activity on the continent. Mercosur has an annual GDP of about US$5 trillion and is home to more than 250 million people.

Russia is rich in natural resources, has strong emerging industries, and a growing middle class. Russian GDP has experienced steady growth since 1998. In 2018, it increased by 1.8%, thanks to solid international growth and rising oil prices. As of 2019, its GDP is $1.64 trillion.

Russia is the dominant partner in the Eurasian Economic Union (EAEU), which includes Armenia, Belarus, Kazakhstan, Kyrgyzstan and Russia. These countries together boast a GDP of $5 trillion and are home to a population of 183 million. There are talks about free trade agreements with other areas, and when reached, it will no doubt change the supply chain. 

India’s GDP in 2019 was $3 trillion. Whereas politics play a role in the uncertainty of investing in some emerging economies, that’s not the case for India. Since gaining its political freedom from Britain in 1946, India established and has since successfully maintained strong parliamentary democracy. The country is the dominant partner in the South East Asian Free Trade Area (SAFTA), which includes Afghanistan, Bangladesh, Bhutan, India, The Maldives, Nepal, Pakistan, and Sri Lanka. The populations in these countries amount to a market of 1.6 billion people. 

China has a particularly strong manufacturing sector, and not just for “Made in China” products exported around the world. According to the National Bureau of Statistics, three fourths of China’s 6.6% GDP growth in 2018 was credited to consumption. And, its growing consumer base, with its growing wealth, wants quality. 

According to Forbes: “South Africa ranks high worldwide for investor protection and the extent of disclosure.” That fact has not been lost on foreign investors, with FDI into South Africa growing by 446% to 7.1 billion in 2018. China and Russia have both invested heavily in Africa.

In addition to being home to the most developed stock market in Africa, South Africa boasts natural resources including gold, iron, ore, coal, platinum, uranium, chromium, and manganese nickel. 

Why Invest in Emerging Markets?

Emerging markets tend to carry a varying amount of political and economic risk, depending on the country. But, on the whole, the sector has lately outperformed more established markets in Europe and North America.

COVID-19 has made this divergence even clearer, with the asset class coming nearly all the way back to pre-pandemic levels as of October 2020. This performance was in part in lockstep with the rest of the world, but since emerging markets stocks tend to fall further in bad times, they have come roaring back even stronger than their first world peers.

Per Lazard: “Following a drawdown of nearly 35% in the first quarter and a sharp 18% recovery in the second quarter, the MSCI Emerging Markets Index rose 9.6% in the third quarter to climb nearly all the way back (96%) to its pre-COVID-19 peak.”

But, as such a large sector that’s spread across so many different countries, investing in the growth of emerging markets can’t be focused on just a few companies. Fortunately, a number of ETFs and mutual funds allow investors to access all of the asset class at one time. A search on Magnifi suggests a number of options for investors interested in the emerging markets.

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The information and data are as of the October 13, 2020 (publish date) unless otherwise noted and subject to change. This blog is sponsored by Magnifi. 

This material is provided for informational purposes only and should not be construed as individualized investment advice or an offer or solicitation to buy or sell securities tailored to your needs. This information covers investment and market activity, industry or sector trends, or other broad-based economic or market conditions and should not be construed as investment research or advice. Investors are urged to consult with their financial advisors before buying or selling any securities. Although certain information has been obtained from sources believed to be reliable, we do not guarantee its accuracy, completeness or fairness. Past performance is no guarantee of future results. This content may not be reproduced or distributed to any person in whole or in part without the prior written consent of Magnifi. As a technology company, Magnifi provides access to tools and will be compensated for providing such access. Magnifi does not provide broker-dealer or custodial services.

Precision Agriculture

The world is facing a food crisis. Not in some distant future, but today, as a growing global population and rising quality of life are demanding more and more production every year in order to feed all of humanity.

According to the United Nations, the global population is on track to increase from 7.3 billion in 2015 to nearly 10 billion by 2050, requiring that food production must double worldwide in that time to keep up with demand and combat hunger, which today impacts more than 1 billion people worldwide. This fact is the result of decades of insufficient investment in agriculture and food security, leaving millions at risk due to rising food prices, economic swings and climate change.

[Save the world while feeding the world: Investing in Organic Agriculture]

In order to achieve true food security in the world, it’s time to start investing in agricultural research, natural resources, local infrastructure and more, per Korea’s UN representative Park In-kook. “Food prices, already high and volatile, could spike again as droughts, floods and other climate-related events affected harvests, and States must develop responses for both the short-term and the medium-term. Agriculture had to adapt to changing weather patterns caused by climate change, and social protection and safety nets had to be strengthened to ensure adequate access to food for those in need.”

And it’s not just any food that’s needed to solve these problems, either. Rising incomes and quality of life worldwide also mean increased calls for proteins, sustainable foods, organics and other nutritious, high quality options.

For those interested in the investment potential of this rapidly-growing sector, there are a few important points to understand.

What Is Precision Agriculture?

At a high level, so-called precision agriculture is simply “the application of new technologies to agriculture. It involves using innovations such as Big Data, GPS and more to increase crop yields and profitability while lowering the levels of traditional inputs needed to grow crops (land, water, fertilizer, herbicides and insecticides).”

It’s all about using less and growing more.

[Climate change is one of the primary challenges of our time. Here’s how investors are supporting the technology that’s making a difference.]

According to Grand View Research: Precision farming, also known as site-specific crop management or satellite farming, is a farm management concept that uses information technology to ensure optimum health and productivity of crops. The precision farming technique largely depends on specialized equipment such as sensing devices, antennas and access points, and automation and control system. It also involves maintenance services and managed services. Additionally, it incorporates a broad range of technologies such as bio-engineering, robotics and automation, imagery and sensors, and big data.

For example, a farmer outfitted with a Big Data analytics platform and a tracking device on their tractor could precisely analyze both when to plant certain crops and how to lay out their fields for maximum production. The system could also manage the application of fertilizers for best effect and tell the farmer when to water and for how long. All of these tools would help increase the amount of food the farm is able to produce while simultaneously lowering the farmer’s costs associated with fertilizers (inputs), fuel and time spent managing their operation.

This type of data can also be used to monitor and optimize a farm for changing weather conditions, soil characteristics, pest problems and more, guiding the farmer’s day-to-day management decisions or taking them entirely off of their shoulders.

In addition to Big Data, as described above, some of the applications for precision agriculture currently under development include:

  • Robotics: Farming is traditionally a labor-intensive, time-consuming line of work. Farmers are famous for their long hours, starting early in the morning, and typically can’t even get away much during the year given all of their responsibilities, from planting to harvesting and much more. Plus, much of the labor force that the agriculture industry relies on is temporary, moving from job to job during the season. Changes to immigration laws, demands for higher pay and more have made hiring a challenge for farms of all types. That’s why robots have shown so much promise in the field. Imagine the convenience of a robot picker that can go out into the field at all hours, informed of the optimal picking time by local data, and manage the entire harvest by itself while the farmer and their crew sleeps. The same applies to specialty robots that can precisely apply fertilizers exactly where and when it’s needed or monitor and empty pest traps automatically.
  • Drones: The FAA is currently reviewing new rules that would enable agriculture operators to use drone to monitor and oversee their crops, delivering eye-in-the-sky functionality that doesn’t truly exist in the industry. For farmers, this means the potential to manage vast tracks of land, including both farms and ranches, without ever even having to drive out to the field. Instead, they could keep an eye on everything from the air conditioned comfort of their home or office. The same goes for fertilizer application and other real-world tasks. This would boost farm efficiency and help drive down costs by eliminating the need for costly, in person oversight work.

Why Invest in Precision Agriculture?

Simply put, the agriculture industry is well behind the times when it comes to the use of technology. Farming is a very traditional industry that has functioned well for generations, producing enough food to keep up with demand while also providing a living for the farmers themselves.

But the growing world population and emerging risks of climate change are changing the math behind agriculture. Efficiency and scale are needed now like never before.

Enter the power of technology to help make this happen.

And it has created a growing market of providers at the same time. According to Grand View Research, the market for precision agriculture companies is expected to reach $10.23 billion by 2025, racking up a compound annual growth rate of more than 14% in that time.

Major factors driving this growth includes farm mechanization, rising labor costs, population, smart farming techniques, and government initiatives to adopt modern agricultural techniques.

Per Market and Markets: Precision farming is gaining tremendous popularity among farmers due to the increasing need for optimum crop production with limited available resources. Further, the changing weather patterns due to increasing global warming have impelled the adoption of advanced farming technologies to enhance farm productivity and crop yield. Precision farming has the potential to transform the agricultural sector, making traditional farming activity more efficient and predictable. Increasing global food demand, extended profitability and crop yield, and crop health monitoring for higher yield production are the major factors fueling the growth of the precision farming market. Also, government initiatives in many countries are helping farmers to use optimized agricultural and technological tools to improve their production levels.

How to Invest in Precision Agriculture

Of course, as an emerging and fast-growing sector, investing directly in precision agriculture companies can be risky and many are still private. A search on Magnifi suggests that there are a number of different ways for investors to get involved in precision agriculture without opening up their portfolios to undo concentrated risk in this new and growing industry.

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Magnifi is changing the way we shop for investments, with the world’s first semantic search engine for finance that helps users discover, compare and buy investment products such as ETFs, mutual funds and stocks. Open a Magnifi investment account today.

The information and data are as of the December 18, 2019 (publish date) unless otherwise noted and subject to change. This blog is sponsored by Magnifi.

This material is provided for informational purposes only and should not be construed as individualized investment advice or an offer or solicitation to buy or sell securities tailored to your needs. This information covers investment and market activity, industry or sector trends, or other broad-based economic or market conditions and should not be construed as investment research or advice. Investors are urged to consult with their financial advisors before buying or selling any securities. Although certain information has been obtained from sources believed to be reliable, we do not guarantee its accuracy, completeness or fairness. Past performance is no guarantee of future results. This content may not be reproduced or distributed to any person in whole or in part without the prior written consent of Magnifi. As a technology company, Magnifi provides access to tools and will be compensated for providing such access. Magnifi does not provide broker-dealer or custodial services.