As the e-commerce investment thesis expanded in recent years, investors rapidly learned that online shopping isn’t a distinctly American theme, nor is Amazon (NASDAQ:AMZN) the only avenue to participating in this segment.
China and companies like Alibaba (NYSE:BABA) opened U.S. investors’ eyes to the emerging markets e-commerce investment thesis. Some other markets are doing the same, putting a spotlight on the right exchange traded funds, namely the Emerging Markets Internet Ecommerce ETF (EMQQ), in the process.
Speaking of Alibaba, which is EMQQ’s second-largest holding at a weight of 8.19%, it’s looking to leverage Lazada, its Southeast Asian unit, in significant fashion.
“The Chinese e-commerce leader is targeting a long-term goal of quintupling gross merchandise value, the sum of transactions across Lazada’s platforms, to $100 billion, Alibaba outlined in a presentation to investors. It wants Lazada to serve more than 300 million users eventually, according to a slideshow posted on its website,” reports Bloomberg.
Lazada operates in six countries — Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam. Singapore accounts for nearly 3% of EMQQ’s geographic exposure, but the real story is the potential that those markets offer.
Other EMQQ holdings, including Tencent Holdings and Sea Group, are taking note. Those are EMQQ’s largest and eighth-largest holdings, respectively, combining for over 13% of the fund’s weight. Spurred by regulatory headwinds in China, companies like Alibaba and Tencent are looking to new markets to expand their online retail footprints, and there’s plenty of room for growth.
“Singapore-based Lazada has grown its GMV to about $21 billion over the past 12 months, after enlarging its active consumer base by 1.8 times to 130 million from March 2020 through September. That’s a ways behind its chief rival in the region, Sea Ltd.’s Shopee, which operates in Southeast Asia and Taiwan and reported more than $56 billion of transactions over the four quarters to the end of September,” according to Bloomberg.
While Sea Group has an obvious lead in Southeast Asian e-commerce, that’s a benefit to EMQQ because, as noted above, it’s one of the fund’s top 10 holdings and is also backed by Tencent.
Beyond that, Southeast Asia offers companies like Alibaba and Tencent avenues for offsetting potential demographic vulnerabilities in China. While China is a massive economy with ample runway for online retail growth, it’s also home to an aging population. Conversely, demographic trends in countries such as the Philippines, Thailand, and Vietnam are more favorable.
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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.