The EMQQ index declined by 9.7% in February, driven by Russian aggression in Ukraine and another round of regulatory fears out of China. [1]
Russia represented roughly 2.9% of the EMQQ Index at the end of last quarter: December 2021. At the current moment, Russia’s weight in the EMQQ Index has essentially been marked to zero, keeping in line with other global index providers. [1]
Negative sentiment out of Russia has created a spill over effect across global equities, further driving down valuations in EMQQ from already suppressed levels.
Meanwhile, the barrage of negative headlines out of the China internet space resumed in February. As we’ve stated in the past, the long-term result of these regulatory measures is likely to benefit both companies and consumers but navigating the headlines in the interim have been tricky as investors over-react to every piece of news out of the space. [2]
That being said, valuations in the Chinese internet space have now shrunk to extraordinary levels. Companies like Alibaba now trade at a record low price to earnings ratio. [3]
The chart below further accentuates the current situation. It compares a company’s cash position to its market capitalization for a series of China tech vs FAANG stocks. As per the analysis below, the net cash position of several large Chinese internet stocks accounts for over 20% of their respective market caps. [4] A particularly large figure.
While the negative headlines picked up again in February, the valuations are quite supportive of a bounce back long term. Meanwhile the fundamentals remain intact with the Index expected to grow revenues 19% in 2022 and earnings closer to 29%. [5]
Emerging Markets ETF and Index Performance (As of 28.02.2022)
|
|
1M
|
3M
|
6M
|
YTD
|
1Y
|
2Y
|
3Y
|
SI
|
|
EMQQ Emerging Markets Internet & Ecommerce UCITS ETF
|
-9.69%
|
-21.57%
|
-32.64%
|
-15.56%
|
-48.74%
|
4.55%
|
14.38%
|
16.07%
|
|
EMQQ Emerging Markets Internet & Ecommerce Index™
|
-9.66%
|
-21.41%
|
-32.06%
|
-15.48%
|
-48.12%
|
6.89%
|
18.42%
|
21.08%
|
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 28/02/2022. Please note that all performance figures are showing net data.
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