5G Adoption Could Give Emerging Markets an Added Boost

Emerging markets can’t catch a break in 2020 just as the group was looking to rebound from 2019, the pandemic squashed those hopes, but the year isn’t over yet. Furthermore, value options could exist in the EM space for investors willing to assume some risk and find the right opportunities, such as 5G technology.

“Emerging markets have always been behind developed countries in adopting the latest generation mobile networks, with a few exceptions,” a Helpnetsecurity article said. “While it would be safe to assume that emerging markets would also lag in 5G adoption, global tech market advisory firm, ABI Research, finds that emerging countries will have faster than expected 5G subscriber adoption.”

“The Compound Annual Growth Rate (CAGR) of 5G subscriptions in emerging markets is estimated to be 26% between 2020 to 2030, an impressive rate considering the global CAGR of 5G subscriptions is only a slightly higher 28% in the same period,” the article also noted, citing that factors like infrastructure and a declining telecommunications sector could impact that growth.

“The pace of the 5G rollout in emerging markets will be expedited by a combination of regulatory enablement, enabling technologies, such as edge computing and OpenRAN (ORAN), and the broader use cases that 5G brings forward,” explains Miguel Castaneda, Industry Analyst at ABI Research.

The adoption of 5G in EM could set up some interesting ETF plays. One is where tech and EM collide, which is the Emerging Markets Internet & Ecommerce ETF (NYSEArca: EMQQ).

EMQQ invests in companies with exposure to the eCommerce and Internet sectors in emerging markets. Purchasing EMQQ provides exposure to companies that are positioned to benefit as emerging economies mature, the consumer class expands, and their populations increase their utilization of the Internet and ECommerce.

EMQQ Chart

EMQQ data by YCharts

For the traders looking for a get-in, get-out opportunity, leveraged options within EM can be utilized with the Direxion Daily MSCI Emerging Markets Bull 3X Shares (NYSEArca: EDC) ETF. EDC seeks daily investment results, before fees and expenses, of 300 percent of the daily performance of the MSCI Emerging Markets Index.

The fund invests at least 80 percent of its net assets in financial instruments, such as swap agreements, and securities of the index, ETFs that track the index, and other financial instruments that provide daily leveraged exposure to the index or ETFs that track the index. The index is designed to represent the performance of large- and mid-capitalizations securities across 24 emerging market countries.

For more market trends, visit the Leveraged & Inverse Channel.