While investors and analysts are concerned about high inflation, aggressive monetary tightening, and a possible recession, emerging markets fundamentals are relatively solid.
Emerging markets equities outperformed developed markets in the second quarter, with the MSCI EM Index finishing down approximately 11%, while the MSCI World Index was down 16%. While this represents a decline of nearly 18% for emerging markets in the first half of 2022, that’s still above the almost 21% decline the developed world experienced during the same period.
“Compared to the developed world, emerging markets equities have held up better this year, and we believe that this could be an attractive entry point for investors to (re)gain exposure to the asset class,” according to Lazard Asset Management.
Emerging markets also offer access to potentially higher economic growth. Per Lazard, they’re currently trading at a 30% valuation discount to developed markets while offering a higher dividend yield, a higher free cash flow yield, and a return on equity profile that’s been improving since the end of 2020.
“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.”
For investors looking to invest in the internet and e-commerce sectors within the developing world, EMQQ Global has a suite of emerging markets exchange traded funds that provide such exposure. These funds include the Emerging Markets Internet & Ecommerce ETF (NYSE Arca: EMQQ), the Next Frontier Internet & Ecommerce ETF (FMQQ), and the India Internet and Ecommerce ETF (NYSE Arca: INQQ).
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.
Launched in April, INQQ intends to capitalize on India’s rapidly growing digital and e-commerce sectors. INQQ seeks to provide investment results that, before fees and expenses, generally correspond to the price and yield performance of the India Internet and Ecommerce Index.
For more news, information, and strategy, visit our Emerging Markets Channel.