Over the next decade, China is likely to emerge as a pharmaceutical superpower. The world’s most populous country, along with other developing nations, are in the process of transforming their knowledge economies from “copycats” to true innovators.
Those were among the major investment themes managers at the American Funds unit of Capital Group see shaping the global economy in what is starting out as a very strange decade. In a webcast on Thursday, equity fund managers Cheryl Frank and Chris Thomsen, along with analyst Brad Barrett, outlined 10 megatrends that they believe will shape the investment landscape.
The first trend identified by Frank is the expansion of cloud-based services. She expects revenue in this area to more than double to about $250 billion by 2025. Every service device, from cars to refrigerators to cameras, will become increasingly digitized, she said.
Neither Frank nor Thomsen placed a specific dollar amount on China’s investment in pharmaceuticals and other health-care industries. The novel coronavirus pandemic, combined with past epidemics, are clearly driving China to make this a priority. Frank sees that country making huge investments in DNA research, immunotherapy and gene editing, among other aspects of health care. While China’s pharmaceutical industry presently lacks the clout of those in the U.S., Japan and certain European nations, it possesses certain built-in advantages. For example, its huge population gives it an unrivaled universe of patients for conducting drug trials.
ESG (environmental, social and governance) issues are increasingly varied and complex, Frank noted. It shows in a growing number of national issues, from wildfires to the pandemic to racial justice, and influences the way she evaluates comanies.
Will McKenna, a Capital Group marketing executive, noted that the mutual fund giant was likely to expand its own ESG footprint later this year.
Artificial intelligence is likely to emerge as the most disruptive trend since the Industrial Revolution, Barrett predicted. The shift to streaming content is also likely to accelerate, while machine learning could start to drive advertising ecosystems, he added.
Google parent Alphabet and Facebook will maintain their dominance, he said. Both companies have high fixed costs and low variable costs, which gives them the option of investing heavily in future development or drop revenue gains to the bottom line.