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Invest for future growth with the seven global major themes

10/06/2021
How AI accelerated
Key takeaways
Factors including COVID-19, new technologies, aging populations and resource shortages are shaping our world. Grasping such structural themes is the only way to seize the best investment opportunities
• The 7 major themes shaping the future economy are digital life, next-generation energy, clean water and land, artificial intelligence (AI), health technology, pet economy and infrastructure
• Adopt proactive management to identify investment themes, and optimize your investment portfolio in a move to let you better navigate this dynamic world

The COVID-19 has in many ways turned our world upside down. At the same time, the use of digital technologies surged and has significantly reshaped our lifestyles. Elsewhere, various other innovative technologies, aging populations, resource shortages and urbanisation are also emerging strongly – all representing change, all creating challenges. Yet, to stay ahead of other investors and seize the best opportunities, it is necessary to make use of these global structural changes.

It is becoming increasingly clear that achieving similar results using traditional investment methods is ever more challenging. Existing industry classifications no longer fully reflect today's corporate structures or fit cleanly into particular investment trends. Many equities cannot be simply classified within a single industry, but nonetheless may trend well overall. For success in the equity market, first identify the right investment themes, then invest.

The pandemic has accelerated many trends, such as stimulating a sharp rise in online shopping and food delivery. More importantly, many trends have emerged that will be difficult to reverse in the "post-epidemic world”. Societies and economies all over the world are rapidly entering a new model. We believe that the following seven themes will be drivers of change worldwide.

Digital life
Digital technologies are shaping the daily lives of billions of people around the world. With the popularisation of 5G and the declining cost of satellite launches, data transmission is getting faster and faster. In addition, consumption models are becoming more digital worldwide. Related markets will continue to shine.
Theme highlights:
Commercial markets such as online shopping, social media and video-on-demand are becoming more mature, while areas such as digital finance, e-sports and remote working offer huge potential.
Next generation energy
Faced with the challenge of climate change, governments around the world have set carbon reduction standards and implemented stricter environmental regulations. Furthermore, the younger generation has high aspirations for society and the environment and has become a major driving force behind the green economy and financing.
Theme highlights:
Clean energy, efficient energy storage and sustainable energy consumption patterns will dominate the future energy world.
Clean water and land
Amid population growth, industrialisation and electrification in emerging markets, and increasing demand for agricultural irrigation, the imbalance between supply and demand of water resources is becoming ever more serious. At the same time, aging dam infrastructure in developed countries is in urgent need of renovation.
Theme highlights:
Companies that improve the water supply, water quality or water efficiency, as well as companies engaging in recycling and waste treatment, will be in the spotlight.
Artificial intelligence (AI)
The technology of AI is advancing quickly, and the industry is training AI to develop real-time viewing, receiving, navigation and interaction functions, so that AI tools can be used to think and learn like humans.
Theme highlights:
AI covers a wide range of areas, including deep learning, machine learning, big data, computer vision, etc.
Health Technology
The development of digital technology in the healthcare industry has tended to lag behind that for online shopping, hotel reservations and banking. Yet, many hospitals and insurance companies have accelerated the adoption of digital technology to reduce costs, increase efficiency, and realise more targeted treatments.
Theme highlights:
Wearable biosensing technology, cloud technology that transmits and stores data, innovative methods to analyse patient data, etc.
Pet Economy
In developed markets, "pet economics" is driven by trends, such as an aging population and healthy living. In emerging markets, the rising middle class has also led to the increase in pets as well as expenditure on caring for pets. Companies that provide products or services for pets have become promising investment choices.
Theme highlights:
The potential for growth in pet food, toys, beauty and medical expenses is very attractive.
Infrastructure
Many highways, bridges, dams, schools and airports in the US are showing their age. Looking forward, the demand for refurbishment and renewal, along with new projects in countries around the world, will increase sharply, bringing structural growth to the industry.
Theme highlights:
This theme covers a wide range of raw material manufacturers, construction companies and equipment suppliers.
Flexible deployment of investment portfolio with themes

The world is dynamic place, in a state of constant change, so today's themes will have a shelf-life. It is important to take a proactive management approach to identify new or adjusted investment themes and then make the appropriate distributions in order to successfully navigate the future.

Allianz Global Investors’ research and analysis of investment themes is global in its coverage. The most exciting investment themes with strong growth potential are carefully selected to create long-term capital appreciation. In order to manage risk and reduce volatility, AllianzGI also makes good use of global corporate credit and emerging market corporate bonds, and is committed to exploring additional sources of income.

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Summary

After the Financial Crisis, InterBank Offered Rates (IBORs) have been declared unreliable by Regulators and new Alternative Reference Rates transactions-based have been developed to substitute these indices. Consequently, most of the IBORs will cease to be published from December 2021. As IBORs are used in a broad range of financial products and contracts, market participants need to be prepared and work on a plan to move away from them.

Key takeaways
  • Most of InterBank Offered Rates (IBORs) are going be discontinued from December 2021
  • New Alternative Reference Rates (ARR) have been identified and developed to substitute IBORs
  • Regulators are publishing guidelines to encourage and support the private market participant in the change.
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