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David Halpert foresees a golden era for technology investors in emerging markets.
His “digital decolonisation” thesis is that entrepreneurs, companies, governments and consumers in developing markets are reclaiming their digital economies and ecosystems from multinationals, and developing indigenous solutions for local problems.
For Friday’s Sohn Hearts & Minds Conference, the founder and chief investment officer of Prince Street Capital Management has chosen a technology company disrupting a major sector in China.
“I just don’t think these huge US behemoths like Facebook and Amazon will have the same share of the Indonesian, Philippine or Thai market that they thought they were going to have.”
COVID has accelerated trends like online shopping and banking and while some observers are expecting payback once COVID is brought under control, there’s been no slowdown yet and Europe and Britain have just started going back into lockdown, with no proven vaccines available yet.
“Presumably, this process of moving online isn’t going to reverse,” Halpert says.
“I definitely see it continuing in Asia, even though the lockdowns are largely winding down.”
He notes that a number of tech companies that had been burning cash for years are suddenly generating cash partly because of COVID and also because SoftBank — a major investor in tech companies — has had a change of strategy regarding its portfolio companies.
“SoftBank had until recently directed their portfolio company CEOs to burn as much money as possible to gain market share after the WeWork collapse,” Halpert says.
“So we’re seeing operating profitability — which we didn’t see for the last couple of years — so that’s an exciting part of what we call the ‘digital decolonisation 30’ companies which are essentially EM (emerging markets) innovation and EM tech innovation.”
He focuses on four “verticals” — e-commerce, healthcare, financial technology and infrastructure — giving a list of about 120 stocks to choose from.
And it’s growing: in October there were five new listings meeting Halpert’s basic criteria.
While the US offers a very deep and fertile innovation market, it’s much more widely researched.
“I would say there’s more discovery of value in the emerging markets tech scene than there is in the US tech scene,” Halpert says.
“There are some amazing companies in the US — the big ones that everybody knows but also small and medium-sized companies that are going to do very well over the next five to 10 years.
“I’m just not necessarily sure where the US index does great because it’s done so well for so long and is such a big part of passive portfolios.”
Based in Singapore, New York, Hong Kong and Dubai, Prince Street Capital Management runs long short, long only, and absolute return strategies for an institutional investor base and is primarily focused on the idea of technological innovation in the developing world.
“I’ve been consistently impressed and excited by how dynamic this sector has become in recent years,” Halpert says. “Investors would do well to focus on how innovation is changing, not just the US and UK and Australia but also, for example, Indonesia or The Philippines or India.”
He also says Australia should “totally have a significant technology ecosystem”.
“It should have IPOs and venture funds and incubators and whether it’s Afterpay or whatever, they should be able to build some companies that are meaningful.
“I think you guys should be leveraging your strategic position to build value and engage with the best tech operations in the region so that over time you can build world-class technology platforms.”
While Australian banks haven’t done so well in Asia in recent years, Halpert is impressed by Australia’s superannuation system relative to the region and sees scope for tie-ups.
“There’s a there’s a lot of opportunity for Australia. Southeast Asians don’t want the Chinese to dominate their economies. They want other friends and Australia is a very logical friend.”
This article was originally posted on The Australian here.
Licensed by Copyright Agency. You must not copy this work without permission.
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