Fidelity International and BlackRock Investment Institute have reported that emerging nations with strong population growth, such as India and Indonesia, are becoming more appealing to investors as demographic concerns begin to impact investment decisions.

Investment in these two growing Asian countries is encouraged by anticipated increases in infrastructure spending, which are expected to revitalise their economies. Recent elections in India and Indonesia have underlined their ambitions to become major economic powers, with their dynamic populations serving as a critical strength.

Among the rapidly ageing regional peers, China, India, and Indonesia stand out. India surpassed China as the world's most populated country in mid-2023, prompting a rush to find prospective South Asian stock market winners.

According to BlackRock's data, there is a favourable association between a country's working-age population growth and share price valuations. Fidelity sees the financial sector as a big benefit, with rising credit demand from both firms and consumers.

"India and Indonesia's labour forces are young, with demographic dividends that far outweigh some of the region's largest economies," said Ian Samson, a portfolio manager at Fidelity in Singapore. "All businesses, large and small, require capital. This helps to explain why bank equities tend to correspond with GDP growth in emerging markets.”

According to World Bank estimates, India and Indonesia are forecast to witness population rises of at least 10 per cent between this year and 2040, while China is expected to see a roughly 4 per cent fall. More importantly, India's working-age population (those aged 15 to 64) is growing, and the country has the youngest demographic of any major economy.

In March, BlackRock Investment Institute strategists led by Jean Boivin noted that a faster rise in the working-age population frequently correlates to stronger future profit growth. They also identified migration, increased labour-force participation, and automation as key drivers.

The demographic dividend, coupled with other distinct characteristics such as favourable election results, is one of the primary drivers of gains in both countries' stock markets. The Nifty 50 Index, which is trading at record highs, is on track to extend its nine-year winning streak. Similarly, in March, the Jakarta Composite Index achieved a record high.

Analysts argue that structural reforms aimed at cutting regulatory red tape, increasing job market flexibility, and allowing foreign investment are vital for capitalising on the demographic advantage.

"Ultimately, the growth equation is employment times productivity," Fidelity's Samson explained. "The substantial structural reforms in both India and Indonesia will support sufficient job creation to benefit from the demographic dividend."

Despite improvement, more action is needed. Investors are paying special attention to whether Indian state governments would execute national-level labour, land, and policy changes. Indonesia's President-elect Prabowo Subianto, who will take office in October, has ambitious aspirations of achieving 8 per cent yearly GDP growth, despite the country's historically low performance.

For sovereign debt investors, the age-dependency ratio, which indicates the fraction of those who are too elderly or young to work, and the fiscal burden are critical long-term investment indicators.

According to Bloomberg data, global investors have invested $5.5 billion in Indian bonds this year, boosted by chances for index inclusion. India's interim budget, unveiled in February, prioritised infrastructure spending above populist initiatives ahead of the general election.

In contrast, international investors have withdrawn $1.8 billion from Indonesian bonds, citing concerns about the country's fiscal health because of the incoming administration's increased spending commitments.

"Aging populations increase the cost of healthcare and pensions, with developed-market economies providing more comprehensive social benefits than most emerging markets," said Sanjay Shah, director of fixed income at HSBC Global Asset Management. "In emerging markets, pension plans may be more staggered and less fixed-benefit oriented," Shah added, thereby lowering the public financial load.

(With inputs from Bloomberg)

Fidelity International and BlackRock Investment Institute have reported that emerging nations with strong population growth, such as India and Indonesia, are becoming more appealing to investors as demographic concerns begin to impact investment decisions.

Fidelity International and BlackRock Investment Institute have reported that emerging nations with strong population growth, such as India and Indonesia, are becoming more appealing to investors as demographic concerns begin to impact investment decisions. Investment in these two growing Asian countries is encouraged by anticipated increases in infrastructure spending, which are expected to revitalise their economies. Recent elections in India and Indonesia have underlined their ambitions to become major economic powers, with their dynamic populations serving as a critical strength. Among the rapidly ageing regional peers, China, India, and Indonesia stand out. India surpassed China as the world's most populated country in mid-2023, prompting a rush to find prospective South Asian stock market winners. According to BlackRock's data, there is a favourable association between a country's working-age population growth and share price valuations. Fidelity sees the financial sector as a big benefit, with rising credit demand from both firms and consumers. "India and Indonesia's labour forces are young, with demographic dividends that far outweigh some of the region's largest economies," said Ian Samson, a portfolio manager at Fidelity in Singapore. "All businesses, large and small, require capital. This helps to explain why bank equities tend to correspond with GDP growth in emerging markets.” According to World Bank estimates, India and Indonesia are forecast to witness population rises of at least 10 per cent between this year and 2040, while China is expected to see a roughly 4 per cent fall. More importantly, India's working-age population (those aged 15 to 64) is growing, and the country has the youngest demographic of any major economy. In March, BlackRock Investment Institute strategists led by Jean Boivin noted that a faster rise in the working-age population frequently correlates to stronger future profit growth. They also identified migration, increased labour-force participation, and automation as key drivers. The demographic dividend, coupled with other distinct characteristics such as favourable election results, is one of the primary drivers of gains in both countries' stock markets. The Nifty 50 Index, which is trading at record highs, is on track to extend its nine-year winning streak. Similarly, in March, the Jakarta Composite Index achieved a record high. Analysts argue that structural reforms aimed at cutting regulatory red tape, increasing job market flexibility, and allowing foreign investment are vital for capitalising on the demographic advantage. "Ultimately, the growth equation is employment times productivity," Fidelity's Samson explained. "The substantial structural reforms in both India and Indonesia will support sufficient job creation to benefit from the demographic dividend." Despite improvement, more action is needed. Investors are paying special attention to whether Indian state governments would execute national-level labour, land, and policy changes. Indonesia's President-elect Prabowo Subianto, who will take office in October, has ambitious aspirations of achieving 8 per cent yearly GDP growth, despite the country's historically low performance. For sovereign debt investors, the age-dependency ratio, which indicates the fraction of those who are too elderly or young to work, and the fiscal burden are critical long-term investment indicators. According to Bloomberg data, global investors have invested $5.5 billion in Indian bonds this year, boosted by chances for index inclusion. India's interim budget, unveiled in February, prioritised infrastructure spending above populist initiatives ahead of the general election. In contrast, international investors have withdrawn $1.8 billion from Indonesian bonds, citing concerns about the country's fiscal health because of the incoming administration's increased spending commitments. "Aging populations increase the cost of healthcare and pensions, with developed-market economies providing more comprehensive social benefits than most emerging markets," said Sanjay Shah, director of fixed income at HSBC Global Asset Management. "In emerging markets, pension plans may be more staggered and less fixed-benefit oriented," Shah added, thereby lowering the public financial load. (With inputs from Bloomberg)

Emerging markets India and Indonesia gain favour as demographics drive investment strategies

After hitting a historic high of USD 84.44 billion last year, China’s trade with India saw a robust growth in the first quarter this year, with bilateral trade netting USD 22.1 billion, up 15.4 per cent year-on-year, a top Chinese official said today. The growth continued from the upward momentum seen last year, when bilateral trade reached a record high of USD 84.4 billion, up 20.3 per cent from the previous year, spokesperson for the Ministry of Commerce Gao Feng said.

“As two large developing countries and major emerging market economies, China and India both have a huge domestic market,” Gao said, adding the economies of both countries are highly complementary to each other, creating enormous potential for cooperation.

“By the end of 2017, Chinese investments into India added up to more than USD eight billion, as India has become an important market for infrastructure cooperation among Chinese companies and a major investment destination,” Gao was quoted as saying by the state-run Xinhua news agency.

His comments came ahead of the two-day informal summit between Prime Minister Narendra Modi and President Xi Jinping in the central chinese city of Wuhan tomorrow, during which a host of issues, including an over USD 50 billion trade deficit between the two countries is expected to figure. A rare novelty of the bilateral trade last year, otherwise dominated by the Chinese exports was the nearly 40 per cent increase of Indian exports to China, totalling USD 16.34 billion.

The bilateral trade volume reaching USD 84.44 billion in 2017 is regarded as a landmark as for the first time it touched USD 80 billion mark, well above the USD 71.18 billion registered in 2016. The trade between the two countries touched the historic high despite bilateral tensions over a number of issues, including the China-Pakistan Economic Corridor (CPEC), China blocking New Delhi’s move to designate Pakistan-based Jaish-e-Mohammed terror group chief Masood Azhar a global terrorist, Beijing blocking India’s entry into the Nuclear Suppliers Group (NSG) and the Dokalam stand-off.

The bilateral trade stagnated around USD 70 billion despite the leaders of both the countries setting USD 100 billion as the target for 2015. Though it is still about USD 20 billion short, officials on both sides expect trade and Chinese investments in India to pick up further this year as both the governments are trying to scale down tensions and step-up the normalisation process.

"As two large developing countries and major emerging market economies, China and India both have a huge domestic market," Gao said, adding the economies of both countries are highly complementary to each other, creating enormous potential for cooperation.

After hitting a historic high of USD 84.44 billion last year, China’s trade with India saw a robust growth in the first quarter this year, with bilateral trade netting USD 22.1 billion, up 15.4 per cent year-on-year, a top Chinese official said today. The growth continued from the upward momentum seen last year, when bilateral trade reached a record high of USD 84.4 billion, up 20.3 per cent from the previous year, spokesperson for the Ministry of Commerce Gao Feng said. “As two large developing countries and major emerging market economies, China and India both have a huge domestic market,” Gao said, adding the economies of both countries are highly complementary to each other, creating enormous potential for cooperation. “By the end of 2017, Chinese investments into India added up to more than USD eight billion, as India has become an important market for infrastructure cooperation among Chinese companies and a major investment destination,” Gao was quoted as saying by the state-run Xinhua news agency. His comments came ahead of the two-day informal summit between Prime Minister Narendra Modi and President Xi Jinping in the central chinese city of Wuhan tomorrow, during which a host of issues, including an over USD 50 billion trade deficit between the two countries is expected to figure. A rare novelty of the bilateral trade last year, otherwise dominated by the Chinese exports was the nearly 40 per cent increase of Indian exports to China, totalling USD 16.34 billion. The bilateral trade volume reaching USD 84.44 billion in 2017 is regarded as a landmark as for the first time it touched USD 80 billion mark, well above the USD 71.18 billion registered in 2016. The trade between the two countries touched the historic high despite bilateral tensions over a number of issues, including the China-Pakistan Economic Corridor (CPEC), China blocking New Delhi’s move to designate Pakistan-based Jaish-e-Mohammed terror group chief Masood Azhar a global terrorist, Beijing blocking India’s entry into the Nuclear Suppliers Group (NSG) and the Dokalam stand-off. The bilateral trade stagnated around USD 70 billion despite the leaders of both the countries setting USD 100 billion as the target for 2015. Though it is still about USD 20 billion short, officials on both sides expect trade and Chinese investments in India to pick up further this year as both the governments are trying to scale down tensions and step-up the normalisation process.

China-India trade volume witnesses 15% rise in Q1

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