Tightening global monetary policies. Supply chain issues. The war in Ukraine. Declining economic growth in China. All in all, it’s not been a great year for emerging markets, but as Benjamin Franklin once said, “Out of adversity comes opportunity.”
Not only are many emerging markets stocks trading at bargain basement prices, but many of these stocks have the potential to soar in the future. Stocks listed on overseas markets have become much less expensive than those in the U.S., some trading at about half the valuation ratios of those in the U.S.
“If you think one step ahead, toward the recession that feels so obvious, that’s bad news for international stocks,” wrote Jason Zweig at the Wall Street Journal. “If, however, you think beyond that, toward an eventual economic recovery, the story changes.”
Added Zweig: “Turning your back on international stocks today, however, is a bet that their lousy performance is pretty much permanent. And not many things in markets last indefinitely.”
“Increasingly these companies are beginning to look like value plays,” said EMQQ Global founder and CIO Kevin T. Carter. “Many of our companies have increased their buybacks and special dividends to record levels. They see the value when they run their internal models. We think investors will as well.”
Long-term investors looking to take advantage of these valuations in the emerging markets space who don’t believe the slump is permanent may want to consider EMQQ Global’s Emerging Markets Internet & Ecommerce ETF (NYSE Arca: EMQQ) and Next Frontier Internet & Ecommerce ETF (FMQQ), which are designed to provide exposure to the internet and e-commerce sectors within the developing world.
By focusing on the internet and e-commerce in emerging markets, EMQQ looks to capture the growth and innovation happening in some of the largest and fastest-growing populations in the world. More than 60% of EMQQ’s assets are weighted toward China.
FMQQ, meanwhile, seeks to provide investment results that, before fees and expenses, generally correspond to the price and yield performance of the Next Frontier Internet and Ecommerce Index (FMQQetf.com). While it has the same investment philosophy as EMQQ, FMQQ has no China-based holdings. Securities must meet a minimum of a $300 million market cap and pass a liquidity screen that requires a $1 million average daily turnover.
Earlier this year, Carter explained that emerging and frontier markets are poised for major growth because of three megatrends: “the rise of the emerging markets consumer,” the computer, and the internet.
Carter expressed the belief that the internet sector would support emerging market growth, especially given the shifting demand among emerging market consumers for smartphones and the internet via mobile broadband. Consequently, EM e-commerce models are “leapfrogging” traditional models and are growing five times as fast as consumption.
For more news, information, and strategy, visit our Emerging Markets Channel.