Emerging market consumers are becoming large influential force in the global markets, exhibiting a preference for online shopping via the smartphone and digital devices. Investors can also capitalize on this shifting in consumer trends through a targeted exchange traded fund that taps into the rapidly expanding e-commerce segment.
On the recent webcast (available On Demand for CE Credit), The Greatest Growth Story in the History of Capitalism: E-Commerce in Emerging Markets, Kevin Carter, Founder and CEO of EMQQ, outlined a number of factors that will support the emerging market outlook, including diversification benefits, a rising middle-income base, more favorable demographics and overall growth outlook in the developing economies.
The emerging markets have shown diversification benefits when compared to developed market exposure, with developing market stocks showing a correlation to the S&P 500 that is less than 1.0. The developing economies make up 85% of the global population and 50% of global GDP, so investors should not miss out on this large chunk of the global picture. The favorable demographics, especially with a larger younger generation, will also help support growth ahead. These developing economies are also expanding at a much faster clip than developed countries, which may provide an attractive growth opportunity for investors ahead.
“The growth of the EM consumer is the story,” Carter said.
Looking ahead, the global consuming class is expected to make up 4.2 billion by 2025, with emerging markets contributing to $30 trillion of total world consumption, compared to $12 trillion back in 2010.
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.