November 2021
AAM Magazine
November 2021
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What to do when stuck in traffic

By Will Ballard*   
  • Asia
  • Global
Traffic jams can offer rare insight into the way emerging-market economies work

Sitting in a traffic jam is never fun, but it’s an occupational hazard when travelling in outsized and overpopulated emerging-market cities. On occasion, however, it can be enlightening. In many of these locations, I find myself part of the captive market for a relentless procession of ingenious entrepreneurs darting between the idling cars attempting to sell anything they can carry. Drinks, sweets, newspapers, local delicacies and such, all delivered right to your (car) door.

On a recent trip to Lima, I was firmly embedded in yet another endless traffic jam in between meetings. To pass the time I watched these sales people, idly wondering whether I wanted a tepid Inca Cola. But what struck me on this occasion was the sheer number of sellers of magnifying glasses.

Why magnifying glasses? As someone still blessed with 20/20 vision, my experience of these somewhat archaic objects consists solely of the childhood memory of my grandmother peering through one at the newspaper crossword.

In developed economies there is generally no longer any need for such equipment outside of philately. We have a wide selection of glasses, contact lenses and, if necessary, routine operations to deal with problems like cataracts. These options are all available in emerging markets too, but at a price. Sometimes, a magnifying glass bought while waiting in traffic is the only option you can afford.

On another recent trip, this time to Shenzhen where I was once again stuck in traffic, I found myself thinking about those sellers of magnifying glasses. I was returning from meetings with several exceptional and promising Chinese companies, but the one that made the biggest impression was a small healthcare concern that specialises in inter-ocular lenses.

I had not heard of inter-ocular lenses until both my parents, gracefully cresting the 70-year mark, had cataract operations in quick succession. These procedures involve the removal of the lens of an eye once it develops cloudy patches and its replacement with an inter-ocular lens. Why buy a magnifying glass when you could have your eyesight restored?

According to Orbis International, a charity dedicated to saving sight worldwide, approximately 1.7 million people in Peru – over 5% of the population – are experiencing some form of visual impairment. Cataract operations, when not provided by a state-funded service, can cost anything up to US$5,000. That’s simply out of reach for most Peruvians on an average salary of $590 per month.

This is not restricted to Peru. The healthcare company I met in Shenzhen is acutely aware of the issue in China where, with its 1.3 billion people, there are at least a million new cataract cases every year. Research also suggests the incidence of cataracts is increasing, affecting 60%-70% of people aged between 50 and 60, and as much as 90% of those over 70. Estimates by Orbis suggest an ageing population could balloon Chinese cataract cases to 167 million by 2020.

As a global emerging-market small-cap fund manager, I have a very clear aim. I want to give my investors the best exposure I can to companies set to benefit from the long-term structural growth trends that underpin emerging markets. Compared to developed markets, most emerging markets have higher growth potential: they have a demographic dividend, a growing middle class, rising consumption and increasing demand for better healthcare.

Finding the right long-term investment that reflects this philosophy within such a vast universe is the real challenge. Starting a year with trips to Peru, Columbia and Chile, followed by visits to China, Hong Kong, Singapore, Malaysia, Thailand and Taiwan, is not unusual but only touches the tip of the 24-country iceberg that is the emerging-market investment universe. It might be ambitious to cover the remaining markets in the second half of the year.

Why does such an investment strategy have such a gruelling travel schedule? As well as making up for the poor quality of research coverage, it is also about looking at things differently from local investors. My aim is not only to decide if Bumrungrad is the best hospital operator in Thailand, but also to assess how it compares to Banmedica in Chile, MLP Care in Turkey, Life Healthcare in South Africa, Fortis Healthcare in India or New Century Healthcare in China.

Engaging with companies, checking their facilities, and understanding the nuances of each market cannot be achieved from the comfort of an office chair. Sometimes, sitting in traffic jams is unavoidable. And while such hold-ups are tedious, they provide opportunities to observe a local economy in action.

Some of the best investment ideas come from the most unusual and unlikely sources. As another entrepreneur weaves between idling cars peddling his or her wares, it is sometimes easier to spot a gap in the market than a gap in the traffic.

* Will Ballard is portfolio manager of the Aviva Investors emerging market small cap fund