Asia
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“Made in China” is a phrase we all know well, but American shopping aisles bursting with “Made in China” goods are becoming more and more a thing of the past, especially as the depth and breadth of Asia’s economies develop. The truth is, this is not just a China story anymore— it’s a story of a new Asia bursting with emerging economies, high-tech industry, and a growing middle class.
Consider that the United Nations estimates that as of July 2020, Asia as a whole has a population of more than 4 billion. That amounts to about 60 percent of the world’s current population.
Asia is growing and its enormous population is buying more and more of its own stuff than ever before. It is estimated that “Asian-Pacific (APAC) countries will have seen a growth in their middle-classes by over 500 percent in the 20 years up to 2030.” This increased buying power will be nothing short of transformative, especially compared with 2 percent growth in Europe and a decline of nearly 5 percent in America over the same period.
Asia’s global output is up 26% from the early 2000s and, according to McKinsey and Company, “Asia is on track to top 50% of global GDP by 2014 and drive 40 percent of world’s consumption.”
This growth isn’t just thanks to China, but small and medium-sized countries throughout the region, as well. Asian business hubs stretch from Singapore to Jakarta, Kuala Lumpur and Manila. In fact, according to an analysis by The Financial Times, Indonesia is on pace to overtake the world’s sixth-largest economy, Russia, by 2023.
Not to mention, Asian exports are not reliant on the United States. Moreover, China’s total exports amount to 40% of the world’s consumption. Although exports to the United States fell by more than 8%, they remained about the same from 2018 to 2019. In other words, China was able to compensate for the drop in exports to the US by exporting more to the rest of the world.
Yes, the region is seeing some political instability in 2020, with protests and crackdowns roiling Hong Kong and other parts of China. But, given the growth that’s happening alongside this, it will take more than that to slow down the Asian expansion.
What’s Changing in Asia’s Markets?
China is no longer simply making the cheap plastic toys that it may have once been known for. Rather, its products are increasingly high-tech and sophisticated.
That means two things: The first is that in China, wages are on the rise. The second is that there is a new space globally for low-cost manufacturing that once belonged solely to China.
Vietnam’s exports are up 96% since 2015, a surge led by the export of low-cost textiles. (It’s worth noting that Vietnam is also home to a global manufacturing base for Samsung.)
In India, Prime Minister Narendra Modi launched the “Make in India” initiative with the goal of developing India into a manufacturing hub that is recognizable on the global scene. And it seems to be working, with India’s exports up 22.5% since 2015.
All of that manufacturing would literally go absolutely nowhere without streamlined logistics, however. “The logistics industry accounts for 15-20% of GDP in Vietnam and is expected to grow up to 12 percent in Indonesia.” In large part, this growth is thanks to both increased investment and streamlined e-commerce.
Why Invest in Asia?
Asia might be set to overcome the West as a center of trade and commerce, but it’s not there yet. And it’s not without challenges. Many countries that are home to emerging markets have also become home to the challenges of emerging countries.
Take infrastructure, as an example.
Paired with challenging geography, poor roadways can devastate supply chains. But, supply chain challenges like those found in Asia can largely be overcome by technology solutions, such as Route Optimization, Predictive Alerts, AI-based forward and reverse logistics, and smart shipment sorting. Additionally, infrastructure spending is on the rise in Southeast Asia, through the formation of institutions such as the Asian Infrastructure Investment Bank and the Japan Infrastructure Fund.
Countries like Indonesia have shown that economic growth for smaller, emerging countries is sustainable. Not only is Indonesia rich with natural resources, it is committed to specialized manufacturing including that of machinery, electronics, automotive and auto-parts. The country has slashed its “poverty rate by more than half since 1999, to 9.4% in 2019.” It’s most recent economic plan implemented in 2005 was for 20 years, broken into 5 year increments.
In all, the Asian continent, with its emerging middle class, increased focus on high-tech manufacturing, and participation by lesser-known counties, has long-term growth potential. And, with this momentum already in full swing, the future looks bright for countries across the continent.
That’s what happens when emerging markets “emerge” all the way into fully developed economies.
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The information and data are as of the July 29, 2020 (publish date) unless otherwise noted and subject to change. This blog is sponsored by Magnifi.
Ecommerce
Through the third quarter of 2020, consumers spent $580 billion online with U.S. retailers according to the U.S. Department of Commerce. Naturally, the fact that millions of Americans were sitting at home during the COVID-19 pandemic had a lot to do with this, but those big numbers were already trending higher. From Amazon, to Ebay, to Shopify, more people than ever are buying and selling online than ever before.
Most consumers know all too well that buying in an instant is easier than ever—from essentials like paper towels to novelties like birthday gifts to splurges like home décor and clothes. And, it seems one purchase always leads to the next, especially because of the carefully curated advertisements and reminders that are automatically triggered by online retail platforms to pop up on our screens.
Here is the short story of how the ecommerce we know on our screens today came to be in a relatively short period of time and why it’s both ever improving and here to stay.
What Is Ecommerce?
Electronic commerce, typically known as ecommerce, refers to the “buying and selling of goods, products, or services over the internet.” It extends beyond the transaction of money to funds and data. Think software subscriptions, streaming services, and data storage, to name a few.
Online shopping as we know it was later thought up by Michael Aldrich in the United Kingdom in 1979. Aldrich dreamed of buying his weekly groceries remotely (something that is all too familiar now) while on a walk with his wife. He accomplished this in a way by connecting a television to a transaction processing computer with a telephone line. He called it “teleshopping,” which referred to shopping at a distance.
Still, the first secure, official online retail transaction didn’t take place until in 1994 when a group of cyberspace entrepreneurs sold a Sting CD from one member to another. The transaction successfully utilized data encryption software to ensure data privacy, which was crucial to the adoption of online shopping.
That same year, in 1994, ecommerce giant, Amazon, launched. Since then, the “e-tailer” founded by Jeff Bezos has grown into the world’s largest online retailer; one that currently dominates B2C ecommerce. Originally selling only books, Bezos’s operation was doing $20,000 per week in sales within 30 days of launch.
Since then, the security, ease of use, and convenience, safety, and user experience of ecommerce have all improved exponentially. These improved factors have made ecommerce a viable and profitable new frontier for businesses large and small.
There are generally four types of ecommerce models. These include direct sellers, which operate similar to a physical store for customers but with transactions taking place online (Amazon and Wayfair); marketplaces, which offer platforms for buyers and sellers to connect (think Etsy); software providers, which sell subscriptions to cloud-based software; and logistics, which deliver goods (like UPS and FedEx). Within these four types, ecommerce generally happens one of six ways— Business-to-Business (B2B), Business-to-Consumer (B2C), Consumer-to-Consumer (C2C), Consumer-to-Business (C2B), Business-to-Administration (B2A) and Consumer-to-Administration (C2A).
Why Invest in Ecommerce?
Purchasing habits are changing with more Americans making purchases online than ever before. And, companies are listening by continuing to expand their technology budgets, which are up 4.2% in 2020 over 2019, in part with the shared goal to improve ecommerce sites and boost online sales.
More than ever, consumers are comfortable using their payment information in secure online platforms. According to a study by Price Waterhouse Coopers, more than half (51%) of respondents paid bills and invoices online in 2018, demonstrating an increasing comfort level with buying and completing transactions online.
Sellers aren’t shying away from the internet either, with numerous benefits for new ecommerce-based entities and traditional brick and mortar establishments alike. From the ability to be open for business and thereby make money 24/7 in an online platform, to providing an online space to accurately describe products in detail, to using SEO to attract consumers, selling online is giving retailers the opportunity to communicate better with customers, reach more people, sell more products, and be more successful.
In other words, the technology that facilitates the buying and selling of goods online, not to mention the companies selling more than ever online, offers extensive investment opportunities. Rest assured, online retail, and business generally, is poised to continue its pattern of growth and innovation.
How to Invest in Ecommerce
Naturally, in something as broad as ecommerce, investing isn’t as simple as choosing a few companies. In order to reach the full scope of this trend it’s important to invest broadly in all of the different sectors and niches that are shaping and being reshaped by this shift. Fortunately, a search on Magnifi suggests that there are a number of ETFs and mutual funds that cover ecommerce.
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with a Magnifi Account
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 July 28, 2020 (publish date) unless otherwise noted and subject to change. This blog is sponsored by Magnifi.
Urbanization
According to the UN, globally three million people move to cities every week.
Talk about the great migration.
And, the trend of people around the world packing up their bags to move to the city isn’t expected to change anytime soon. Current projections anticipate that 60 percent of the world’s population will be living in urban areas by 2030, according to Euromonitor.
As more and more people have turned in their rural lifestyles in exchange for crowded urban spaces and better opportunities, the massive number of people moving to cities has had a major impact on what the world looks like… not just sitting in traffic, but also from outer space.
A megacity is an urban area with a population of at least ten million people. In 1990 there were only 10 megacities, which were home to 7 percent of the world’s total urban population. As of 2018, there are now 33 according to a 2018 white paper from Euromonitor titled Megacities: Developing Country Domination. This multiplication of megacities all over the globe has had major implications on the environment.
Urbanization as a megatrend is not lost on investors. With changes happening at hyper speed, a host of opportunities for new and emerging high-growth business models are ripe for investment.
What Is Urbanization?
To say the least, urbanization at such a massive scale makes city-living much more complicated.
While increased urbanization is linked to more economic development in the form of new jobs and better productivity, it does not directly cause it: urbanization only spurs economic development in the presence of other factors including the availability of non-farm jobs, infrastructure, and public services.
These are no easy check boxes to fix when you consider that pervasive challenges in emerging urban environments include “insufficient infrastructure, inadequate urban services, rising informal settlements, poverty, urban insecurity, increasing inequality and climate change.”
In other words, poor infrastructure paired with a lack of investment in emerging cities can make or break a city’s success.
Not to mention, failure to develop sustainable growth can literally change the face of the planet. According to NASA’s Megacities Carbon Project, megacities are the largest human contribution to climate change.
While cities occupy only 0.5% of the world’s land, they “consume 75% of its natural resources and account for 80% of global greenhouse gas emissions.” When it comes to the planet, environmental implications are not distinct and separate from economic development.
While China’s has been lauded for its economic development, its poor urban air quality and water pollution costs the economy 6% GDP each year according to the World Bank. In the US, the cost is roughly $1 trillion per year.
That’s a lot of money lost, but not without notice.
The big problems that urbanization presents are being met with big investment, first in the public sector. For example, on the pollution front, NASA has a Megacities Carbon Project that develops, tests, and improves “robust methods for assessing carbon emissions and monitoring the atmospheric trends of carbon attributed to the world’s largest cities.”
The private sector is also eyeing changes and spending big money.
In 2016, PriceWaterhouseCoopers anticipated that private companies would invest $78 trillion in global infrastructure over the next ten years to support the growth of cities. Where will that money go? To smart solutions.
Why Invest in Urbanization?
More and more, notable investment firms are calling for balance as a means to long-term, sustainable urban growth. In other words, new digital and data-driven solutions should improve livability, productivity, and value, spurring further economic development.
According to global investment firm BlackRock, urbanization will usher in new infrastructure, alternatives to car ownership, new healthcare solutions, increased personal security, and more “smart” applications.
In an interview with telecrunch, Niko Bonatsos, a managing director at the venture firm General Catalyst Partners, describes two buckets when it comes to investment and urbanization: “The first is in helping cities to run more efficiently, and this is anything that’s happening in the background that you don’t notice until it breaks down – water management, parking, safety, energy stuff. The second bucket is more consumer-facing, meaning products and services that make life better, easier, and more convenient for inhabitants of dense cities.”
In other words, for investors, urbanization is a catalyst for new business models across the board—
from delivering public services to planning urban environments. Examples of smart solutions include e-hailing for shared vehicles, smart metering, e-government, and digital payments for real-time services… just to name a few.
As the world’s population moves at an unprecedented rate, so are the solutions that are helping to make urbanization more sustainable. Together, urbanization and investment is an equation for economic growth.
How to Invest in Urbanization
Naturally, in something as broad and multinational as urbanization, investing isn’t as simple as choosing a few companies. In order to reach the full scope of this trend it’s important to invest broadly in all of the different sectors and niches that are shaping and being reshaped by this shift toward urban living. Fortunately, a search on Magnifi suggests that there are a number of ETFs and mutual funds that cover urbanization.
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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 July 22, 2020 (publish date) unless otherwise noted and subject to change. This blog is sponsored by Magnifi.
Women's Leadership
Women’s leadership in the workplace is a work in progress. But for many, it’s not advancing quickly enough.
Nearly 30 percent of senior management roles were held by women in 2019, according to a report by Grant Thornton. This is the highest number ever on record, featuring an increase of five percentage points over the previous year.
Still, women only held six percent of the CEO positions at S&P 500 companies as of December 2019. Even more, in the US, women still earn almost 20 percent less than their male counterparts, according to the Forum for Sustainable and Responsible Investment Foundation’s Investing to Advance Women: A Guide for Investors.
While the slow rate of change might make progress feel impossible, investors do have some say in the matter. More than ever, investors can put their money in companies that explicitly prioritize women’s leadership, helping to advance gender equality in the workplace and beyond.
What Does It Mean to Invest in Women’s Leadership?
Financially investing in women can help to drive the growth of women in leadership roles. Moreover, it promotes gender diversity in business culture, recruitment policies, and staff retention policies. At its apex, financial investment in organizations that focus on women in leadership has the potential to create gender parity at the most senior level.
The history of formalizing a company’s commitment to women and communicating it to the public has evolved over prior decades, with each iteration more progressive than the last.
In 2004, Calvert Women’s Principles™ were developed in partnership with the United Nations Entity for Gender Equality and the Empowerment of Women (UN Women).
These principals were accepted as “the first global corporate code of conduct focused exclusively on empowering, advancing and investing in women worldwide.” They include: (1) employment and compensation, (2) work-life balance and career development, (3) health, safety, and freedom from violence, (4) management and governance, (5) business, supply chain, and marketing practices, (6) civic and community engagement, and (7) transparency and accountability. These principals were a sort of baseline for companies to say that “yes” we do this, and a temperature check to help identify where they fall short.
In 2009, the Criterion Institute, a non-profit think tank, introduced the term “gender lens investing” or using investment to promote gender equality. The Institute’s goal extends beyond linking gender to just investing, but to (as they describe it): “equipping people to participate in making the connections between gender and finance.”
In 2010, the United Nations introduced the Women’s Empowerment Principles on International Women’s Day, which it adapted from the original Calvert Women’s Principles®.
In 2016, the mission continued with the launch of the Level Panel on Women’s Economic Empowerment at the Commission on the Status of Women. The panel is still in existence today with the aim to close the gender pay gap entirely, among other goals.
Then, in 2017, Criterion introduced the Blueprint for Women’s Funds. This report sees corporate engagement as one arm of a larger toolbox. It seeks to bridge the leverage of the financial sector with diverse leaders that advocate for gender equity to have long-term impact.
All of these initiatives for gender equality further similar goals with different scopes.
Why Invest in Women?
Investors increasingly want to leverage their financial power to further social change, including gender equality in the workplace. Investing is a great way to accomplish that end.
According to the Women’s Investment Principals, investment in women is an engine for change. More and more, people are doing just that.
Fidelity Investments launched a women-focused mutual fund in 2019. The Women’s Leadership Fund invests in companies that either have a significant percentage of women in leadership positions or “meet gender diversity initiatives for hiring, retention, paid leave and promotion of women.”
Why? Despite the lagging progress for equality, we all know that women bring a lot to the table. According to research featured in the Harvard Business Review, women outscored men on 17 of the 19 key leadership capabilities.
And, there are more and more success stories of women in corporate leadership roles. In 2014, Mary Barra became the first woman CEO in the auto industry at General Motors(GM). Two years later in 2016, GM named the first female chairman in the auto industry. In 2018, GM named Dhivya Suryadevara its Chief Financial Officer. During Barra’s tenure, she was tasked with tackling the ignition switch crisis as well as other recalls. She successfully led GM to transcend the public relations crisis, gaining respect as a leader in the industry.
According to a growing body of research, female leadership is increasingly linked to improved financial returns.
According to analysis from Boston-based trading firm Quantopian, “women CEOs in the Fortune 1000 drove three times the returns as S&P 500 enterprises run predominantly by men.”
More, the 2016 Gender Report by Credit Suisse found that the higher the rate of women in leadership, the higher the returns to investors.
According to Patricia Lizarraga, managing partner at Hypatia Capital, “if every woman in the U.S. invested $100 in female business leaders this year, it’d total somewhere around $15 billion.” In other words, even small investment amounts have the potential to create some major momentum.
In the world of the “me too movement” and social change, the woman’s voice is louder than ever before. Now is the opportune time for investors to back those voices with the dollars to create change in corporate culture specifically by investing in companies that advocate for women by offering them workplace equity and leadership opportunities.
How to Invest in Women’s Leadership
Of course, investing in companies based on social issues isn’t easy, as different companies take different approaches to these concerns and often their businesses are not directly related to them. However, ETFs and mutual funds focused on women’s leadership are a good way to access this growing sector without having to invest directly in specific companies. A search on Magnifi suggests there are a few different ways to do this.
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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 July 13, 2020 (publish date) unless otherwise noted and subject to change. This blog is sponsored by Magnifi.
Infrastructure
As the economy rides out the new reality of the Coronavirus, spending on infrastructure could be an answer to the United States’ economic woes, according to a nearly $1 trillion government proposal currently in the works.
The U.S. infrastructure funding law is up for renewal on September 30th. In its absence, investors are expecting something big to happen. The news of the non-finalized proposal already sent stocks soaring. Last week, upon the announcement, Fluor Corp. surged 11% before regular U.S. trading began, while Vulcan Materials Co., another heavy infrastructure company, similarly climbed by 8.3%.
Regardless of the fate of this specific proposal, infrastructure as an agenda item isn’t going anywhere. According to a statement from White House spokesman Judd Deere, “Since he took office, President Trump has been serious about a bipartisan infrastructure package that rebuilds our crumbling roads and bridges, invests in future industries, and promotes permitting efficiency.”
In fact, infrastructure has been on the minds of lawmakers for some time now. In January, the Democratic-led house laid out a $760 billion, five-year infrastructure package. That follows another package set forth by President Trump two years prior that totaled $1.5 trillion. While neither of these proposals were the final fix, they underscore the need for improved infrastructure throughout the United States, and tangentially, a new era of government investment in the U.S.
It’s a sure bet that with the pending renewal date, the next generation of government-led investment is imminent in one form or another. Here’s what all investors need to know.
What Is Infrastructure?
Traditional infrastructure includes roads and bridges, yes. And in the U.S., ours need a lot of work. According to the American Society of Civil Engineers (ASCE), the U.S. needs to spend some $4.5 trillion by 2025 to fix the country’s roads, bridges, dams, and other infrastructure items that Americans rely on every day.
Per the same report, the 2017 Infrastructure Report Card (which is published by the ASCE every four years) many of the one million pipes that carry American drinking water have been in use for almost 100 years. Aging pipes are a serious issue when you consider that there are an estimated 240,000 water main breaks per year, not to mention issues with contamination.
And, more than 200,000 of the 614,387 bridges in the U.S. are more than 50 years old. It is estimated that these will cost as much as $123 billion to fix.
This physical infrastructure needs to be fixed.
But, amid today’s technological renaissance, our society is largely reliant on wireless technologies and networks more than ever, and that counts as infrastructure too. Accordingly, there is also a need to innovate and improve in the wireless and 5G network arenas, as well as implement better broadband access for rural areas of the country.
In other words, infrastructure today refers to both Route 66, as well as the “information superhighway.”
Why Invest in Infrastructure?
Roads and bridges are in many ways at the core of economic growth. According to the ASCE, “infrastructure brings you breakfast.” Its website follows a bagel from wheat fields in the Midwest to a bakery in the South, demonstrating how the price of the bagel is impacted by its journey along America’s infrastructure.
Traditional infrastructure provides essential services to society and benefits. They are “essential to the sustainability and growth of an economy,” according to the Royal Bank of Canada’s Global Asset Management.
Even more, because there is often little competition in regulated industries or after a government contract is established, traditional infrastructure investments tend to have sustainable cash flows and resistance to economic swings.
If the market for roads, bridges, and pipes seems pretty straightforward, consider what the new high-tech infrastructure of 5G could mean.
Given that the transition from 3G to 4G wireless communication helped usher in the era of online banking, Uber, and Snapchat, the nationwide transition from 4G to 5G could mean big changes and opportunities. 5G offers the most capable wireless infrastructure available that has the potential to be 100 times faster than 4G, with increased connection capacity.
Market intelligence firm IDC forecasts that worldwide 5G connections will reach 1.01 billion in 2023. That’s up from approximately 10.0 million from 2019. That’s good news considering that 5G is anticipated to be a driver of technological growth for years to come, supporting the “future digitization and automation of systems, connecting smart sensors with AI.”
In a world where the internet is more capable and reliable than ever before, does the wireless transmission of energy seem like a thing of science fiction?
It’s not. In fact, it’s already possible through UV rays, microwaves, electromagnetic fields, inductive coupling, and via Wi-Fi. And, even our electric toothbrushes. If applied on a large scale to the world outside of our bathrooms, the wireless transfer of energy could be transformative. It could give people without a reliable source of power, in rural areas for example, wireless access to a sustainable power supply.
The companies that make the component parts of this technology, like the makers of semiconductors that make chips for smartphones, are sure to soar with increased demand. Consider also the makers of wireless sensors, which support new gaming capabilities of 5G, and the manufacturers of fiber optic technologies that support new 5G networks.
It’s not just the makers of the hardware that will benefit. Mobile apps that require large amounts of data transfer, from Netflix to Spotify, are anticipated to see a boost from increased online capacity. Standard 5G systems are also expected to boost the speed and efficiency of cloud computing services.
The future of infrastructure is twofold — on both an improved roadway, and improved information highway. The need for investment is not a surprise to lawmakers or to the average American — but the reality of investment, especially considering the looming September 30 deadline, is imminent.
How to Invest in Infrastructure
Given the broad reach of infrastructure as an asset class, it can be challenging for investors to fully diversify their holdings. However, infrastructure-focused ETFs and mutual funds are a good way to access this sector without investing directly in individual companies. A search on Magnifi suggests there are a few different ways to do this.
Unlock a World of Investing with a Magnifi Account
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 July 6, 2020 (publish date) unless otherwise noted and subject to change.This blog is sponsored by Magnifi.