Carter warned of certain considerations as investors look to emerging market exposure. For example, state-owned enterprises, or companies created by the government to take part in commercial activities, may be a major cause for concern as many broad emerging market benchmarks include a hefty weights in state-owned enterprises, some with around a 30% tilt. These state-owned enterprises come with their own risks, such as conflicts of interest, inefficient management, poor corporate governance and corruption.
Furthermore, Carter argued that the changing ways we interact with the world will also affect emerging market opportunities. Specifically, emerging market countries are witnessing growth of affordable access to broadband, with smartphones usage overtaking both mobile phone and personal computers. The greater global connectivity has in turn shifted consumer habits from visiting traditional brick-and-mortar shops to increased usage of online retail shopping or e-commerce.
As investors consider their options to access the growing emerging market consumer segment, one can look to a targeted play like the Emerging Markets Internet & Ecommerce ETF (NYSEArca: EMQQ) to access the quickly expanding global consumer sector, notably those related to online retailers or the growing e-commerce industry in the developing world. To be included within the ETF’s underlying index, companies must derive their profits from E-commerce or Internet activities and include search engines, online retail, social networking, online video, e-payments, online gaming and online travel.
EMQQ primarily focuses on the internet and e-commerce sectors of the developing world, helping investors capitalize on consumption in emerging markets, which represents a significant opportunity as more than a billion people are expected to enter the consumer class in the coming decades.
Financial advisors who are interested in learning more about an emerging market opportunity can watch the webcast here on demand.