Emerging market stocks and related ETFs may be a way for investors to capture a relatively cheap segment of the global markets.
“Very often, in the past, emerging market stocks have sold at enormous price-earnings multiples for the market. The emerging markets as a whole, we’ve come down from the high 30s to the 11 to 13 range,” Dr. Burton Malkiel, Princeton Economist, said, referring to the current price-to-earnings ratios for developing market equities.
One way to capture the potential growth opportunity in the developing economies is through the Emerging Markets Internet & Ecommerce ETF (NYSEArca: EMQQ), which provides exposure to the growing emerging market consumer sector, notably those related to online retailers or the quickly expanding e-commerce industry.
EMQQ is a fund with a long-term growth story underpinning its exposures, covering holdings that have experienced annual revenue growth of over 34.1% for the past four years ended 2018. While most of the ETF’s portfolio has been, and remains, on China, the fund’s tilts toward Latin America, Africa, and India also helped post strong returns.
The Emerging Markets Internet & Ecommerce ETF recently undergone a rebalance in June. Fourteen companies were added while six were deleted, bringing the total holdings to 65 companies and China remained the largest weighted country in the index at 60.28%, while the weighting of Brazil was increased to 4.60 % during the rebalance. Meanwhile, the weightings in Argentina and Russia were reduced to 6.73% and to 5.84%, respectively.
Significant additions to the index include African e-commerce company Jumia (JMIA), Brazilian online payments services companies Pagseguro Digital (PAGS.N) and Stoneco (STNE.QQ), Chinese discount ecommerce company Pinduoduo (PDD), Chinese video sharing company Bilibili (BILI) and South Africa satellite television company MultiChoice Group (MCHOY).
“2019 has so far been a bounce back year for stocks of Emerging Market ecommerce companies,” Kevin Carter, founder of EMQQ, said in a note. “This remains much more than a quarter-to-quarter or even year-to-year story though, as low smartphone penetration rates in the Emerging Markets coupled with what we believe are strong fundamentals and attractive valuations offer further potential for Emerging Markets internet and ecommerce companies to see growth for potentially decades to come.”
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This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results.
This information should not be relied upon by the reader as research or investment advice regarding the fund or any stock in particular. The opinions expressed may not be representative of experiences of other investors.
Investing involves risk, including the possible loss of principal. Investments in smaller and mid-sized companies typically exhibit higher volatility. The fund is non-diversified. International investing may involve risk of capital loss from unfavorable fluctuations in currency values, from differences in generally accepted accounting principles, or from economic or political instability in other nations. Emerging markets involve heightened risks related to the same factors as well as increased volatility and lower trading volume. Frontier markets generally have less developed capital markets than traditional emerging market countries, and, consequently, the risks of investing in foreign securities are magnified in such countries. These countries are subject to potentially significant political, social and economic instability, which could materially and adversely affect the companies in which the Fund may invest. The Fund invests in the securities of Internet Companies, including internet services companies and internet retailers, and is subject to risk that market or economic factors impacting technology companies and companies that rely heavily on technology advances could have a major effect on the value of the Fund’s investments.
There is no guarantee that the Fund or the index will achieve its investment objective.
As of 08/22/19, EMQQ did not have any holding of Cisco.
Carefully consider the Fund’s investment objectives, risk factors, charges and expenses before investing. This and additional information can be found in the Fund’s prospectus, which may be obtained by visiting www.emqqetf.com. Read the prospectus carefully before investing.
Shares are bought and sold at market price (not NAV) and are not individually redeemed from the Fund. Market price returns are based upon the midpoint of the bid/ask spread at the close of the exchange and does not represent the returns an investor would receive if shares were trade at other times. Brokerage commissions will reduce returns. NAVs are calculated using prices as of 4:00 PM Eastern Time.
Exchange Traded Concepts, LLC serves as the investment advisor, and Penserra Capital Management LLC serves as a sub advisor to the fund. The Funds are distributed by SEI Investments Distribution Co. (1 Freedom Valley Drive, Oaks, PA, 19456), which is not affiliated with Exchange Traded Concepts, LLC or Penserra Capital Management LLC.