The corporate landscape that evolves after the coronavirus pandemic will be different to the one we knew beforehand. Like markets, life won’t revert to the mean. Amid the economic damage, there will be innovation and progress, and many businesses will become stronger as a result.
The emerging-markets structural-growth story is driven by an aspiring and growing middle class, increasing digitisation and development by governments through productivity-boosting reforms and infrastructure projects. The widespread disruption caused by the Covid-19 pandemic will change the environment in which businesses will operate in, and this is likely to impact their growth and profitability.
Our focus remains on long-term, structural drivers of growth: the rollout of 5G networks, greater digitisation and applications of the internet of things, rising financial penetration, healthcare and infrastructure development and growing consumer appetite for premium products. We favour quality operating companies in these fields amid the ongoing economic uncertainty, weak commodity markets and potential credit-quality issues.
Taking this perspective, we view the current environment as an opportunity rather than a threat. While we don’t expect markets to gain substantially in the short term, there is potential to increase our exposure to attractively valued companies that can emerge from this crisis by improving their competitive advantage and compound value for investors over the long term.