The outlook for emerging markets has changed. Materials and energy companies used to be key drivers of developing world markets. Now, the focus has shifted to technology and consumer companies that are benefiting from the rapid adoption of mobile phones, increasing internet use and rising wealth.

Consumers Fuel Explosive Growth in Technology as Industrials Fade

Sources: MSCI, RIMES as of 10/31/16.Top holdings are as of 12/31/96, 12/31/06 and 12/31/16.

“During the next 10 years, developing countries are expected to add about a billion people to the middle class and above. They will account for nearly half of total global consumption. I believe that is going to have a transformational impact on the world’s economy,” notes Capital Group portfolio manager Noriko Chen.

Growing populations are already shaping consumption habits. Most of the world’s two billion millennials (those born between 1980 and 2000) live in developing market economies.

After several challenging years, the outlook for emerging markets is attractive compared with developed markets. A number of countries have taken positive steps to strengthen their fiscal policies. Earnings are forecast to grow. The rise in living standards and the ever-expanding reach of the internet have created fertile ground for those in search of promising investment opportunities.