Southeast Asia is one of the emerging markets. With a consistent annual economic growth rate of 5%, the growth of stocks will also continue to rise.
However, without proper management, the potential of emerging markets will not reach its maximum potential. This is because many factors influence the success of emerging markets.
One of these factors is currency stability. A stable currency will attract foreign investors, which will help industries grow more quickly. Maintaining currency stability is not easy, and you must constantly monitor central bank policies.
Another factor is competitive advantage. Countries that have companies with above-normal competitive advantages tend to have high potential for future profits. In emerging markets, there are still opportunities to find hidden gems like this, but proper management is necessary.
In addition, the human resources factor is also important. With excellent human resources, local residents will enjoy economic growth. This is because a good job market requires workers with high skills to maintain company performance.
Financial Literacy
Financial literacy is an important aspect of whether an emerging market will quickly become a developed market or not.
Without financial literacy, the growth of people's incomes will not reach its maximum potential. For example, if there is a scam claiming to be an investment opportunity, this will worsen the potential for future company growth and job creation.
In addition, without financial literacy, many people get lost. For example, politicians and public officials may engage in corruption because they believe that getting cash is the way to become billionaires, whereas billionaires usually make their wealth through owning company shares, where the company's income is typically 10% of the share price.
Ironically, if financial literacy is low, economic growth will be enjoyed by foreign investors, while local investors will only enjoy a small amount of future growth after realizing its potential. A developed market without local investors who enjoy its benefits is like building a sandcastle on the beach.
However, obtaining financial literacy is not easy. You need to read credible sources regularly and avoid misleading advertisements.
Far From Technology
Believe it or not, most people don't realize the huge potential of technology. It's more than just enjoying videos on TikTok.
Ordinary companies usually have a normal P/E Ratio of 10, some even below that. However, if a company has incorporated technology into its core business, it can have a P/E Ratio of up to 100.
P/E Ratio stands for Price to Earning Ratio. It is an indicator that reflects how much a company is worth compared to the amount of revenue it generates each year.
However, not all businesses that use technology-based services can be said to have a high P/E Ratio. There are several criteria, one of which is placing technology at the core of the business, not just as a support.
Nevertheless, using technology in business can reduce unnecessary costs and save valuable time. Some technologies are designed to make business operations easier.
Huge Potential To Unlock
One of the problems in emerging markets is that many business people avoid forming a legal entity as a form of business. Some even avoid it because they are afraid of taxes.
However, without becoming a legal entity, the market they serve is very small, making it difficult for per capita income to rise. This is because of the legal barrier.
Imagine if five small businesses in the same sector joined together to establish one company. By joining together, they will be stronger in serving a larger market, in addition to increasing their wealth.
Having a personal business is different from having a company. If you earn 1 billion personally, then your assets are only 1 billion plus the parent capital, while if the company earns 1 billion and you own 50% of the shares, your wealth could be 5 billion if the P/E Ratio is 10.
In addition, continuously growing and going public will benefit both business people and society. Business people who own companies also tend to work more easily because many business activities have been carried out by employees, especially with a decentralized system.
Super Sexy
Well-managed Emerging Markets will surely attract the attention of investors from all over the world.
This could be an opportunity for local businesses or local investors, or it could be their downfall. For example, if local investors are included in the funding series of ABCD, local investors will also benefit in the future.
On the other hand, small business owners without financial literacy may lose their market share to larger companies. But if small business owners have financial literacy, competition will be tougher and consumers will have better options for products and more competitive prices.
Emerging Markets usually have a lot of potential that can be developed, such as the creative industry. Emerging Markets tend to have unique cultures and arts, so if the creative industry grows, it will produce products with distinctive features.
These distinctive features could be a competitive advantage that makes it successful in both local and international markets. Nevertheless, Emerging Markets will create great wealth, but it depends on how they are managed if they want to have a big impact on local communities.
