With emerging markets stocks and cryptocurrencies both trading lower this year, it’d be easy for investors to criticize both asset classes.
After all, some of the reasons these assets are faltering in 2022 are the same, but heaping amounts of criticism applied to bitcoin, other digital currencies, and emerging markets equities belies an under-appreciated opportunity: The future potency of crypto and emerging markets coming together.
As investors well know, there are plenty of emerging markets exchange traded funds on the market today, but not many are constructed in such a way as to adequately address crypto-related opportunities. The Next Frontier Internet & Ecommerce ETF (FMQQ) is and the proof is in the pudding.
“A 2021 crypto adoption index published by industry watchdog Chainalysis ranks Vietnam, India, and Pakistan as the top three, followed by Ukraine, Kenya, Nigeria, and Venezuela. Nineteen of the top 20 countries are in the developing world. The exception is the U.S. at No. 8,” reported Craig Mellow for Barron’s.
That’s a relevant point for FMQQ investors to consider because India is the ETF’s third-largest country weight at 18.28%. Vietnam, though not a major part of the FMQQ roster, is one of the countries in the fund’s selection universe.
Broader adoption of crypto in emerging markets is relevant to FMQQ because the ETF’s fintech exposure recently increased. It’s arguably one of the more fintech-heavy ETFs in the emerging markets category, indicating it’s ahead of the curve. That’s a potential plus for investors at a time when the usage case for crypto is growing in developing markets.
“A rising use case for crypto in emerging markets is remittances, the $700 billion or so transferred annually in tiny chunks by expatriate workers to families back home. High fees and delays in payouts make this business ripe for disruption, in theory,” according to Barron’s. “A quarter of remittance senders from the U.S. have already experimented with crypto, according to a survey by website PYMNTS.com.”
Time will tell exactly how crypto adoption shapes up in emerging markets, but it’s taking hold today and that could pay long-term dividends for FMQQ investors, particularly if country-level regulatory hurdles are cleared.
For more news, information, and strategy, visit our Emerging Markets 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.