Emerging markets' huge uptake in IT power players is not just down to Asia and investors can find multiple success stories in the wider market.
Speaking to sister site Citywire Selector, AA-rated Pangaro said: 'MercadoLibre, one of Latin America’s (16%) most popular ecommerce sites, has exhibited strong execution over time, combining ecommerce with a payments platform and improved logistics. The company has become one of the largest in the region.
'However, recently Amazon has begun to shift more of its focus to Latin America. While we are watching developments closely, we still believe MercadoLibre is strong enough and well positioned in key markets to compete with Amazon.'
Meanwhile in Russia, where Pangaro has 5.4% of the fund, he said there are a number of interesting and innovative companies that tech-savvy investors can look to position in.
He named Yandex and Mail.ru as to specific successes. Pangaro added that tech and innovation is also hitting the banking sector. He highlighted how Sberbank, the dominant bank in Russia, is using digitalisation to expand.
'During a recent meeting with the company, the senior management mapped out its strategy for creating a digital ecosystem with the aim of becoming a one-stop service centre for their clients.
'They had clearly researched the potential threats coming from fintech and internet companies moving into the banking sector.’
Pangaro said the rise of technology companies and increased innovation is under-appreciated by the market.
‘Many observers originally viewed these EM internet and technology companies as just ‘copycats’ of what US internet companies were doing. Alibaba would become the eBay of China (25.4%), and Tencent would mimic Facebook’s success; but this does not reflect the reality today.
‘For example, Alibaba is able to harvest data to improve user experiences and conversion rates well beyond what many US firms can accomplish.
'China is the clear standout in terms of its development of a home-grown digital economy. Ecommerce as a percentage of total retail sales is 15.5% in China, compared with 8.1% in the US, and is still growing.’
But why has it grown so fast? Pangaro said the so-called ‘traditional economy’ in these countries are much less mature and so easier to disrupt.
'Retail is a great example, as is mobile payments. Credit card penetration has been historically low, but now many consumers are leapfrogging straight to mobile payments directly, which is why Alibaba’s Alipay and Tencent’s Tenpay have been growing at extraordinary rates.
'China is also chipping away at the lead held by the US in terms of artificial intelligence. After dominating in the fields of online search, ecommerce, online games, and social media, companies like Baidu, Alibaba, and Tencent are pushing ahead with expansive and exciting AI programmes.
‘There has been much talk about the Chinese government taking a 1% investment stake in some of the internet companies and we are monitoring this closely.
'At this point, we are comfortable with this somewhat symbolic investment and believe the government is unlikely to assert its influence in ways that could jeopardise the growth of these leading companies,' he added.
Over the three years to the end of January 2018, the T Rowe EM Equity fund returned 47.50% in US dollar terms. This compares with a 41.39% rise by its Citywire-assigned benchmark, MSCI EM (Emerging Markets) TR USD, over the same time period.