With emerging markets equities showing signs of recovery, investors looking to play that trend should look for growth and leadership. The KraneShares Emerging Markets Consumer Technology ETF (NYSEArca: KEMQ) checks those boxes.
KEMQ tracks the Solactive Emerging Markets Consumer Technology Index. “The Index selects companies from 26 eligible countries within emerging markets whose primary business or businesses are internet retail, internet software/services, purchase, payment processing, or software for internet and E-Commerce transactions,” according to the fund’s fact sheet.
Focusing on consumers in developing economies is paying off for investors this year. KEMQ is higher by almost 18% while the MSCI Emerging Markets Index is lower by 1.81%. This isn’t likely to be a one-off stretch of out-performance, either.
“Emerging Markets Consumer Technology refers to the online companies that facilitate the everyday activities of the middle class in Emerging Markets, one of the fastest-growing consumer groups on the planet. According to a study from the Brookings Institution, middle class consumption could reach 50% of total global consumption by the year 2030, more than doubling from 2015,” according to KraneShares research.
Call on KEMQ
The rising digital consumer wave in emerging markets has opened many new opportunities, and investors can look to a targeted ETF strategy that captures companies best positioned to benefit from these permanent shifts in consumer behavior.
KEMQ’s underlying index “specifically focuses on growth sectors within EM, comprised of companies whose primary business includes E-Commerce, online software services, mobile payment processing, and social media platforms,” according to KraneShares.
Investors should also acknowledge coronavirus implications when considering KEMQ.
“The countries that make up the majority of KEMQ’s holdings, such as South Korea and China have been more successful than the US so far at curbing the spread of the virus. Furthermore, South Korea and China have the advantage of having been the first to experience major outbreaks of Covid-19,” notes KraneShares.
In fashion superior to those rivals, KEMQ is levered to the rising trend of e-commerce and online shopping through smart devices in an increasingly digital age. The rise of e-commerce has also paralleled the increased adoption of smartphone usage or the declining costs of smartphone devices.
“Allocating to Emerging Markets Consumer Technology through the KraneShares Emerging Markets Consumer Technology ETF (KEMQ) may provide meaningful diversification for US investors while maintaining many attractive attributes of FAANG-type companies that have driven technology’s outperformance in the US,” notes KraneShares.
For more on disruptive technologies, visit our Disruptive Technology Channel.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.