investors: India stands out for EM investors in ageing world

The investors are focusing on the two nations in emerging Asia, thanks in part to an expected boom in infrastructure spending, which in turn bodes well for the countries’ economies. Both India and Indonesia coincidentally had elections this year, showcasing to the world their ambition to transition into major economic powerhouses with their dynamic population a key strength. The two countries stand out at a time when rapid ageing has plagued peers in the region, including China. India surpassed China as the world’s most populous nation in mid-2023, a historic milestone that unleashed a rush to identify potential winners in the South Asian nation’s stock market.

BlackRock’s analysis shows a positive relationship between a country’s working-age population growth and share-price valuations, while Fidelity sees the financial sector as a key beneficiary as credit needs grow for both corporates and consumers.

“India and Indonesia’s labor forces are young – with demographic dividends that far outshine some of the largest economies in the neighborhood,” said Ian Samson, a fund manager at Fidelity in Singapore. “All companies big and small require financing. This in part explains why bank stocks generally correlate with GDP growth in emerging markets.”

India and Indonesia are projected to see population gains of at least 10% from this year by 2040, according to data from the World Bank, while China will likely see shrinkage of nearly 4%.A more important metric would be changes in the working-age population, defined as those between 15 and 64 years old. Even before the historic overall population decline in China, its working-age cohort had been shrinking for years, while India’s is the youngest among major economies. A faster increase in the working-age group typically translates into higher future earnings growth, BlackRock Investment Institute strategists wrote in March.