Emerging Markets Monthly Report | February

18 February 2022

Emerging Markets ETF Monthly Report: Key Takeaways

For the first month of year, EMQQ declined 6.4% driven largely by increasing concerns around higher interest rates. We put this topic and valuations in greater context below. This, of course, comes on the heels of a difficult 2021 for EMQQ investors. Most of last year’s decline can be attributed to ongoing fears of increasing Chinese regulation. But fundamentally, the EMQQ story remained unchanged with revenue projected to finish fiscal 2021 up over 35%. [1]

While 2021 was the year of heightened regulatory scrutiny in China, we expect the government to strike a softer tone in 2022, allowing its tech giants to digest and adopt to a series of new norms. While negative headlines were in over-abundance last year, the underlying issues behind these stories are far more fixable on a company level. This includes toning down monopolistic behaviours and improving data privacy/ security. China aggressively played catch up on the regulatory front in 2021 but the shock factor should dissipate as the country’s tech giants adjust. This is exemplified by a recent meeting between China’s top regulators and 27 Chinese companies, which stressed the importance of “promoting the healthy and sustainable development of internet companies.” [2]

The outlook for the remainder of 2022 looks more promising. While EMQQ has experienced similar bouts of volatility in the past, the long-term trend of increasing digitalisation often provides stable footing for investors. Based on 2021 estimates, there are still over 480 million people yet to own a smartphone in China. [3] Over 800 million in India. [4] That’s a multi-decade theme.  

On the policy front, 2022 should be a year of easing in China. Not only should regulatory pressures abate from elevated levels, but on the macro level, China is expected to launch more accommodative monetary policy to help stimulate the economy. [5] This contrasts with the US, where rates are expected to creep upwards due to higher inflation. This combination of regulatory and monetary easing should help provide a more constructive backdrop for Chinese equities this year, particularly in the hard-hit internet sector. 

Meanwhile, the story outside of China continues to accelerate. Following the December 2021 rebalance, the number of non-China companies in EMQQ exceeded that of our Chinese holdings for the first time, although the latter still accounts for more than 50% of the Index’s total exposure. [1] It is encouraging to see the EMQQ story scale beyond China to markets in a much more nascent stage of their development. India is a market of particular interest. Despite boasting the second largest population in the world (behind China), the investible universe of Indian internet stocks has been quite limited historically. That has changed over the last 12 months as wave of new tech companies have entered the public markets for the first time. This cohort of companies from “low base” markets should help drive the fundamental EMQQ over the long-haul. 

On the valuation front, the fundamentals remain on solid ground. As CAPE ratios in the US unwind from multi-year highs, emerging markets remain at subdued levels. In fact, the gap between EM and developed market valuations is wider now than at any point since 2006. [6]  As we turn the page to 2022, the PEG ratio of the EMQQ Index is still less than half that of the Nasdaq 100 Index. Sentiment should get an added boost as brokerages continue to upgrade their earnings per share estimates for 2022. [7] Lower valuations and earning upgrades should help set the tone for the rest of 2022. 

We understand inflation and interest rates are top of mind for investors as we navigate the rest of 2022. Market watchers are paying closer attention to the profitability of the companies they own and their ability to compound earnings over the long term. While EMQQ is growth orientated, the Index is largely comprised of profitable companies. Over 75% of the Index’s exposure is to companies that are expected to generate a profit for fiscal year ending 2021. Eight of our top 10 holdings are indeed profitable. Innovative, profitable and tailwinds supported by emerging markets marching towards higher smartphone penetration and digitalization.  


 Emerging Markets ETF and Index Performance (As of 31.01.2022)










EMQQ Emerging Markets Internet & Ecommerce UCITS ETF









EMQQ Emerging Markets Internet & Ecommerce Index









Past performance for the index is in USD. Past performance is not an indicator for future results and should not be the sole factor of consideration when selecting a product. Investors should read the prospectus of the Issuer (“Prospectus”) before investing and should refer to the section of the Prospectus entitled ‘Risk Factors’ for further details of risks associated with an investment in this product. Source: Bloomberg / HANetf. Data as of 31/01/2022. Please note that all performance figures are showing net data.


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