Executive Summary

Emerging markets are moving to the centre of global economic growth, commanding world-leading positions in industries that will define the next digital and green transition. For European companies, institutional investors, and policymakers, this creates a strategic imperative: to compete effectively, they must move beyond viewing emerging markets as low-cost production bases and instead engage with them as innovation hubs and demand centres. Drawing on insights from Franklin Templeton's analysis, this article explores why local presence and deeper insight are becoming critical differentiators in emerging market investment, and how European businesses can leverage these capabilities to enhance their competitive positioning.

Introduction

The global economic centre of gravity is shifting. According to IMF projections, many emerging markets are expected to grow faster than developed economies in 2026 and beyond. Countries such as India, Vietnam, and Indonesia are expanding at rates that outpace the G7 average, while their share of global output and trade continues to rise. For Europe—a region deeply integrated into global value chains—these trends carry significant implications for industrial policy, trade strategy, and corporate investment.

Yet the scale of opportunity is matched by complexity. Emerging markets are diverse, volatile, and often under-researched. A one-size-fits-all approach is no longer sufficient. As Franklin Templeton's campaign stresses, "local presence, deeper insight" is the key to unlocking value. This principle resonates strongly for European stakeholders seeking to navigate a fragmented and fast-evolving economic landscape.

Main Analysis

The Global Shift to Emerging Markets

The data is striking. China produces 80% of the world's EV batteries, Taiwan 77% of advanced semiconductor chips, South Korea 67% of DRAM memory chips, and India accounts for 55% of global software development outsourcing. Brazil leads in coffee and iron ore, Chile in copper, and South Africa holds 71% of platinum production. These are not peripheral suppliers—they are critical nodes in the industries that underpin modern economies.

For Europe, which relies heavily on imports of batteries, chips, and critical minerals, this concentration of production is both a vulnerability and an opportunity. The strategic response cannot be purely defensive—it must include proactive engagement in these markets. European companies that invest in emerging economies but fail to understand their local dynamics risk being outmaneuvered by competitors with deeper roots.

Why Local Presence Matters

Local presence is not just a physical office; it is a capability. It means having investment professionals, business development teams, and partnerships embedded in the market. Franklin Templeton, with over 100 investment professionals across 17 countries, illustrates the value of this approach. Their on-ground teams identify companies and trends that global benchmarks often overlook, providing a richer dataset for investment decisions.

For European corporations, local presence enables better risk management. It allows them to navigate regulatory shifts, cultural nuances, and supply chain disruptions with agility. It also opens doors to innovation: many emerging markets are leaders in digital adoption, fintech, and sustainable technologies, offering lessons and partnerships that European firms can adapt to their own markets.

Deeper Insight Through On-the-Ground Research

The research edge is significant. When investment teams operate locally, they can conduct more thorough due diligence, verify assumptions, and build relationships with management teams. Franklin Templeton's platform covers more than 1,200 companies globally, combining local access with global perspective. This hybrid model—local expertise plus global analytical rigor—is essential for making informed decisions in an environment where information is often scarce and unreliable.

For European asset managers and institutional investors, incorporating deeper insights into emerging markets means constructing portfolios that are not simply index proxies but are built around highest-conviction ideas. Active share and rigorous valuation frameworks become tools for outperformance. In a world where US dollar weakness is creating tailwinds for emerging markets, the ability to distinguish between cyclical gains and durable growth is more important than ever.

Business Impact

For European businesses, the implications are across several dimensions:

• Corporate strategy: Accessing emerging markets for both sales and sourcing is likely to become a core pillar of competitive strategy. European companies that fail to establish local footholds may lose market share to regional players and more agile multinationals.
• Industrial development: European industries, particularly automotive, electronics, and machinery, need reliable access to emerging market inputs. Investing in local partnerships can reduce supply chain vulnerabilities.
• Foreign direct investment: Both European outward FDI into emerging markets and inward FDI from these economies into Europe are expected to increase. Policy frameworks should adapt to facilitate this two-way flow.
• Innovation: Emerging markets are no longer just imitators; they are pioneers in areas like mobile payments, renewable energy deployment, and e-commerce. European firms can gain competitive advantages by tapping into these innovation ecosystems.
• Employment and SMEs: A deeper engagement with emerging markets can create skilled jobs in Europe as companies expand international operations, while SMEs may find new export opportunities through digital platforms.

European Perspective

From a European Union standpoint, emerging markets are central to trade and climate objectives. The EU's Green Deal demands massive investments in clean energy and battery technology, which increasingly rely on supply chains anchored in emerging economies. The proposed Critical Raw Materials Act is a acknowledgment of this dependency. At the same time, the EU's Global Gateway initiative seeks to mobilise investment in sustainable infrastructure in partner countries, creating new avenues for European businesses.

Deeper insight into emerging markets should also inform EU-level policy. By understanding how industrial policies in China, India, and other economies shape global markets, the European Commission can design more effective response strategies—ranging from competition policy to trade defence mechanisms.

For the Eurozone and national governments, encouraging business presence in emerging markets is a matter of competitiveness. Nordic countries, Germany, and France have significant export exposure to Asia and Latin America; maintaining intelligence and operational capability in these regions is vital. Cross-border cooperation within Europe, such as joint research and investment platforms, can enhance collective bargaining power and risk-sharing.

Future Outlook

Over the next 3–5 years, the importance of emerging markets for European prosperity will likely intensify. Several trends are expected:

• Digital economy proliferation: Emerging markets will account for a growing share of global internet users, e-commerce, and digital services consumption, offering new revenue pools for European tech firms and digital platforms.
• Supply chain diversification: European companies will accelerate efforts to reduce dependence on single markets, prompting a wave of investment in Southeast Asia, Mexico, and Africa.
• Green transition partnerships: Collaboration between Europe and resource-rich emerging economies will deepen, particularly around hydrogen, solar, and battery minerals.
• Capital flows: European institutional investors will allocate more to emerging market equities and debt, driven by demographic tailwinds and improving corporate governance.
• Technological leapfrogging: Emerging market companies will influence global standards in AI, biotech, and advanced manufacturing, requiring European firms to stay connected to these innovation hubs.

To succeed, European businesses and investors must treat emerging markets as long-term strategic commitments, not as distant opportunities of convenience. That means building local teams, sustaining research presence, and embracing patience. The reward is not only financial return but also a strengthened position in a multipolar global economy.

Conclusion

The message from Franklin Templeton's "Emerging markets - local presence, deeper insight" is a powerful one for Europe. As the global economy continues its structural shift, European competitiveness depends increasingly on understanding and engaging with emerging markets. This requires a new mindset—one that values on-the-ground knowledge as much as head-office strategy. By adopting a locally informed, deeply researched approach, European businesses and investors can transform the challenges of distance and complexity into a durable competitive advantage.

Key Takeaways

• Emerging markets are global leaders in critical industries, from battery production (China, 80%) to semiconductor chips (Taiwan, 77%) and rare earth elements (China, 69%).
• Europe's reliance on these inputs makes strategic engagement essential for economic security and industrial competitiveness.
• Local presence and deeper insight are critical for navigating diverse market conditions and identifying high-quality investment opportunities.
• Franklin Templeton's model—over 100 professionals in 17 countries, covering 1,200+ companies—demonstrates the value of embedded research.
• European businesses must move beyond sourcing and sales to participate in innovation ecosystems in emerging markets.
• Policy frameworks at EU and national levels should support outward and inward investment flows that strengthen Europe's global position.

Sources

• Franklin Templeton Investments: Emerging markets - local presence, deeper insight