The threat of increased regulations and reforms is another obvious obstacle. Regulatory restrictions that began at fintech firms such as Alibaba and Tencent have recently been extended to the education sector, in a bid to force tutorial firms to become nonprofits.
But just because indices are under China’s dominance doesn’t mean active portfolios should be, too. What’s more, the pandemic is likely to have some significant effects on the global economy and its supply chain that could create opportunities regardless of the world’s second-largest economy.
For investors with a long-term horizon, the advantage of investing in emerging markets is attractive. Over the past 30 years, emerging markets have not only substantially outpaced their developed counterparts in terms of economic growth, but often in terms of market returns as well.
Emerging economies are gradually transitioning from export manufacturing to domestic services.
They are also reaping the benefits of increased personal income, consolidation of consumption patterns, and an increasingly healthy, educated, and better-connected workforce.