- While delisting headlines have been persistent over the last year, the reality has always been that the risks of such an event occurring are quite low. More importantly, we believe it is not an immediate risk based on the timeline provided by the SEC itself. Hence, this remains a very fixable issue.
- At the minimum, both US and Chinese regulators have at another 2 years to resolve their differences related to the Holding Foreign Companies Accountable Act of 2020 (HFCAA) [1], which has become the centrepiece of delisting fears.
- Fortunately, it has recently been reported that Chinese authorities are preparing to give U.S regulators full access to auditing reports of a vast majority of Chinese companies listed in New York. [2] This would go a long way to resolving concerns around delisting of Chinese ADRs.
- We are monitoring these developments very closely while also being fully prepared to convert a vast majority of our Chinese ADR exposure to their Hong Kong secondary shares, if necessary. The companies that don’t have a secondary listing in Hong Kong are accelerating their plans to do so.
- Stated otherwise, we think the risks of delisting are very low, and the scales appears to be tipping toward a solution. But there are also clear and actionable contingency plans in place should that change.
Growth and Valuations
- While sentiment has shrunk to all-time lows, the fundamental emerging markets story remains intact.
- The chart below illustrates the growth figures of top Index companies in 2021 following as a series of year-end results. In essence, the gap between the underlying growth and performance has never been wider.
- Valuations continue to decline to unprecedently low levels. For clients who want a deeper dive on that, please reach out to the team. [3]
- Several companies in the EMQQ Index have responded with record stock buybacks programs, providing a strong signal of a confidence in their long-term prospects. None bigger than Alibaba, which recently raised its buyback to $25 Billion. [4]
- While headlines continue to ebb and flow, valuations are potentially conducive for long-term investors. Predicting a catalyst in the short term is indeed difficult, but at the very least both the growth and valuations are very supportive.
Emerging Markets ETF and Index Performance (As of 31.03.2022)
|
|
1M
|
3M
|
6M
|
YTD
|
1Y
|
2Y
|
3Y
|
SI
|
|
EMQQ Emerging Markets Internet & Ecommerce UCITS ETF
|
-8.66%
|
-22.87%
|
-33.51%
|
-22.87%
|
-48.18%
|
4.37%
|
1.26%
|
6.03%
|
|
EMQQ Emerging Markets Internet & Ecommerce Index™
|
-8.36%
|
-22.55%
|
-32.84%
|
-22.55%
|
-47.37%
|
6.94%
|
5.01%
|
10.95%
|
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 31/03/2022. Please note that all performance figures are showing net data.
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