Alice Stretch, investment manager, Baillie Gifford
As with any investment, your capital is at risk.
Emerging markets have evolved from manufacturing hubs to innovation powerhouses that have the potential to leapfrog established Western competitors.
When typhoon Co-May hit Shanghai in July 2025, flights were grounded and ferries docked, but something remarkable happened: Pony.ai’s driverless taxis made their commercial debut in the city.
Encouragingly for the startup, its autonomous cabs slowed whenever the rain intensified but otherwise handled the wild weather with ease.
Their edge? Relentless testing in conditions that would challenge any human driver. Self-cleaning sensors, meanwhile, handle conditions ranging from snow to sandstorms.
Pony.ai’s ‘robotaxis’ cost a fraction of those of Western peers, helping the firm charge lower fares. That helps today, as Chinese citizens typically earn less than American counterparts. But it could also help the company compete globally at a later stage.
Pony.ai also highlights another competitive advantage that investors look for: businesses unconstrained by legacy infrastructure with the potential to leapfrog incumbents.
Another example of this is Nubank. Traditional banking in Brazil has been painful, marked by high fees, long queues and poor customer service.
Nubank is the country’s first fully digitalised bank and has offered an escape from the old system of excessive charges. Moreover, by gathering about 30,000 data points per customer – enabling more accurate credit assessments – the firm can tailor its financial products to each user responsibly.
Another market feature that long-term investors look for is the ability for an emerging market company to have a “multi-act growth story”.
For example, MercadoLibre, began in Latin American ecommerce but has discovered a new source of growth in fintech (MercadoPago) and, more recently, online advertising.
Singapore’s Sea Ltd offers another example. It started in video games (Garena) and used the proceeds to bankroll an online shopping platform (Shopee) which expanded into digital financial services (SeaMoney). Its ability to evolve rests largely in having a decisive founder-chief.
Sea is led by Forrest Li, who combines vision with disciplined execution. Not only does he build high-performing teams, he allocates capital to technology-led growth and isn’t afraid to adapt or pivot when needed.
Vietnam’s Mobile World is another company with a multi-act arc.
As its name suggests, the firm started as a mobile phone retailer. But it has since drawn on its relationship-building experience with suppliers, advanced inventory system and execution-focused culture to make the leap into groceries.
Under its Bách Hóa Xanh brand, Mobile World has built a chain of more than 2,100 physical stores.
And its scale and efficiency mean it can outcompete rivals on fresh food and packaged goods prices.
Durable appeal
Taiwan is home to TSMC, the world’s biggest manufacturer of high-end computer chips. Baillie Gifford first invested in the firm in 1999 and our familiarity with the firm has led us to invest in other companies that flourish in its wake.
Some are directly related, including Chroma ATE, which makes precision measurement equipment for the semiconductor industry. Others are more tangential, such as E Ink.
It creates ‘electronic paper’, a reflective screen that can hold an image without power, a product with strong disruptive potential.
People might be familiar with this technology from Kindle or other ebook readers, but now E Ink tablets are catching on, with low enough latency to let you make notes, highlight text and draw diagrams naturally.
The feel of paper, the power of digital. E Ink tablets offer a cost-effective, eco-friendly way to read, write and work anywhere.
E Ink is also creating e-paper for signage, which could replace big electricity-intensive LCD screens in cities, as well as traditional shelf labels in supermarkets. Walmart, among others, is installing these to update its prices automatically. This allows retailers to synchronise prices in minutes, cutting paper waste, and launch promotions at scale at speed.
Of course, macroeconomic concerns remain when investing in emerging markets.
We can’t predict every event, but we do control how much exposure we have when we take certain risks.
And in many cases, these are profitable, especially when you invest in innovative companies with years of growth potential ahead. Many global portfolios are still massively underexposed to emerging markets. That’s likely to change. And if we’re right, investors who add to emerging markets will be rewarded.
Alice Stretch
Investment Manager
Alice is an investment manager in the Emerging Markets Equity Team. She joined Baillie Gifford in 2018, starting out as an analyst in the Emerging Markets Equity Team. She has previously worked in the Long Term Global Growth, Global Alpha and Credit teams. Alice graduated BSc in Political Economy from King’s College London in 2018.
For more information, visit Baillie Gifford’s website.
Important information
This article does not constitute, and is not subject to the protections afforded to, independent research. Baillie Gifford and its staff may have dealt in the investments concerned. The views expressed are not statements of fact and should not be considered as advice or a recommendation to buy, sell or hold a particular investment. Baillie Gifford Investment Management (Europe) Ltd is authorised by the Central Bank of Ireland.