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Study shows disparity between emerging market product consumption and investment behaviour

  • 93% of UK adults use an emerging market product or service daily, yet only 11% are invested in these markets
  • 27.3m UK adults watch a Samsung TV and one in four UK adults use Beko products in their home, both based in emerging markets, yet many consumers are hesitant to invest in these markets
  • When openly asked whether country of origin matters to consumers when considering buying products and services, half (49%) of UK adults say that this is not important to them
  • Of those who deem country of origin important to their product decisions, almost one in five (17%) mention that they look to “buy British”

Emerging market products and services are fundamental to all aspects of our daily lives, yet many UK consumers are actively not investing in emerging market companies despite the opportunities that exist in them, according to new research from Templeton Emerging Markets Investment Trust (TEMIT) 1.

Findings from TEMIT’s Foreign to Familiar report2, which used quantitative data alongside Adoreboard’s cutting-edge Emotion AI analysis, found that 38% of consumers had positive feelings when thinking about emerging markets3. Yet, in practice only one in ten (11%) UK consumers invest in emerging markets despite a staggering 93% admitting to using at least one product from these countries on a daily basis. This could be a TV or washing machine made by Samsung in South Korea, or a 5G chip for their mobile phone manufactured in Taiwan, for example.

In fact, two fifths (41%) of consumers revealed that they have a Samsung TV (South Korea), but 56% of them are hesitant to invest in emerging markets. Similarly, 36% use a Samsung phone (South Korea), but 52% of them are hesitant to invest in emerging markets.

ProductDaily Users of ProductNumber Hesitant to Invest in Emerging Markets
Samsung TV (South Korea)41%56%
Samsung Phone (South Korea)36%52%
Apple Phone (EM exposed)37%59%
Beko tumble dryer (Turkey)19%60%

Research into the usage of emerging market products found that 27.3m UK adults watch a Samsung TV (based in South Korea) 4 and one in four UK adults use Beko products in their home (a company based in the emerging market of Turkey).

Chetan Sehgal, Lead Portfolio Manager at Templeton Emerging Markets Investment Trust: “Not actively investing in emerging markets could mean consumers are missing out on significant growth potential for their investments. Investing in emerging markets offers many benefits compared to their developed-world competitors. The strength in their economies is driven by innovative, high technology companies and strong consumption patterns, meaning that their growth potential is far superior. But looking under the hood into what consumers think of emerging markets, we’ve found that perceptions are holding them back from investing in them. As a result, many opportunities to participate in the projected growth in some of the world’s fasted growing economies, while taking advantage of global diversification, are often overlooked.”

To put this into context, a monthly investment of £50 a month into a cash account over an 18-year period (an overall investment of £10,800) would mean an investor would have a mere £11,176.  An investment into the FTSE100 over the same time period would have returned £18,987. An investment into the passively managed MSCI Emerging Markets Index would have returned £27,859, and finally an investment into the actively managed TEMIT will have returned you £33,403.5 That’s £22,227 more than what one would have earned in a savings account.

Overall, the evidence suggests that investing in emerging markets could deliver favourable returns and opportunities for greater portfolio diversification longer-term, in large part because of their exposure to innovation and a growing middle class, and thus growth potential.

When openly asked whether country of origin matters to consumers when considering buying products and services, half (49%) of UK adults say that this is not important to them. This means 51% think the country of origin is important.

Of those who deem country of origin important to their product decisions, almost one in five (17%) mention that they look to “buy British”. This number increases to 26% amongst female baby boomers. However, over two thirds (68%) of those who are interested in “buying British” use emerging market products every day.

Analysing the language of respondent’s answers to the questions posed, the report looked into how consumer perceptions impact decisions towards businesses and products from emerging markets. For example, when discussing the general perception of emerging markets, UK consumers expressed excitement and interest, citing emerging markets as the leaders in advances in technology and innovations. However, while there are some strong positive perceptions towards emerging markets, 41% of respondents had negative perceptions of emerging markets, notably about environment, social, and governance issues. But delving into the reasons behind their concerns, in actuality, feelings are often misplaced.

Looking at sustainability and environmental issues, currently 93% of emerging market countries have stock exchanges that are members of the Sustainable Stock Exchanges Initiative.6 This is a United Nations partnership programme providing a global platform to explore how Environmental, Social and Governance (ESG) issues can be enhanced amongst stock exchanges, investors, companies and regulators worldwide. Likewise, 96% of emerging market countries have signed the Paris Agreement goal to limit global warming to 1.5 degrees Celsius.7 Of the 26 countries that signed, 25 solidified their support by ratifying the agreement. Yet 12% of respondents suggested they would be deterred from investing in emerging markets due to sustainability issues in these markets. It’s evident that misperceptions and lack of knowledge on emerging markets are holding consumers back from investing in them to access superior financial benefits.

Awareness of ESG issues in emerging markets has intensified in recent years. China’s clean energy sector for example has ample opportunity for growth. We anticipate the decarbonisation of China’s economy—a key pillar of its green transformation strategy announced in the 2021-2025 Five Year Plan—will continue to accelerate. The country now leads the world in clean energy production and produces more than 70% of all solar photovoltaic panels, half of the world’s electric vehicles and a third of its wind power.8 Moving forward, we anticipate a widespread increase in the adoption of renewable energy technologies,” noted Chetan.

Emphasising how emerging markets are everywhere around us, Chetan concluded: “Emerging markets are more familiar to us than we think; 93% of consumers use at least one product from an emerging market daily. From our phones to washing machines, we rely on these emerging markets products every day. They keep us connected to people around us and enhance our lives for the better. Yet, when consumers consider investing in emerging markets, the perception shifts to them being too risky. It’s important to remember that our perceptions and emotions have a significant impact on our decision making, but if those are out of sync with reality, consumers may be missing out on favourable investment opportunities.”

 

 

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