- For the month of April, the EMQQ Index declined 6.4%, dragging the YTD return to -27.5%. This all comes against a backdrop of weakness across global equities this month, especially in the tech sector.
- However, towards the end of the month, Chinese internet stocks got well-needed reprieve as signs emerge that Beijing may begin to curb regulations on the tech sector to help support the economy.[1] The Index held a 57% China weight at the end of April 2022.
- Meanwhile, regulators in China and the US continue negotiating how to let a team of inspectors from the Public Company Accounting Oversight Board visit China so they can scrutinize auditing procedures and access the reports of a majority of Chinese ADRs.[2] This could go a long way to solving the delisting issue with Chinese ADRs trading in the US.
- Valuations and relative growth have been there for quite some time. But understandably, Investors need a third leg to stand on. And that’s positive sentiment. Both developments above are steps in the right direction.
- In other parts of the world, The European Union announced a new Digital Services Act, which is set to increase the regulatory scrutiny on big tech platforms. Companies could face fines of up to 6 percent of their annual turnover for noncompliance.[3] On top of that, Facebook announced that it could face material fines for violations of the bloc’s General Data Protection Regulation (GDPR). [4]
- This news item isn’t meant to raise alarm about Facebook and other US-based tech companies. It just reinforces what the EMQQ team has been saying over the last 12 months: China regulators aren’t alone in these policy shifts. If anything, China may be well ahead of its Western peers in its attempts at creating a better regulated internet. While China may be closer to the end of its regulatory cycle, it may be the opposite in the West.
Please note that all performance figures are showing net data. Past performance is not an indicator for future results and should not be the sole factor of consideration when selecting a product.
Macro Outlook
The gap between the fundamentals and the underlying performance of the EMQQ Index continues to widen. Understandably fears around geopolitics and Chinese ADR delistings have stoked poor performance over the last 14 months.[5] But we believe the growth potential of the emerging markets internet sector remains squarely intact despite the onslaught of negative headlines. [6]
The story is starkly different for the Nasdaq 100 Index over the last decade. Performance has swelled well ahead of its earnings growth. Whereas we’ve seen years of multiple appreciation for US based tech companies, the exact opposite is true for companies in the EMQQ universe. Multiple companies across the EMQQ Index have compressed aggressively over the last year, putting valuations in a much better place relative to other global tech-heavy gauges. [7]
This backdrop does seem conducive to some level of converge in coming years as the market begins to better appreciate the growth story of the EM tech space.
Source: Bloomberg, EMQQ Global Analysis
Emerging Markets ETF and Index Performance (As of 30.04.2022)
|
|
1M
|
3M
|
6M
|
YTD
|
1Y
|
2Y
|
3Y
|
SI
|
|
EMQQ Emerging Markets Internet & Ecommerce UCITS ETF
|
-6.41%
|
-22.79%
|
-39.08%
|
-27.81%
|
-51.64%
|
-12.31%
|
-8.83%
|
-0.77%
|
|
EMQQ Emerging Markets Internet & Ecommerce Index™
|
-6.36%
|
-22.48%
|
-38.49%
|
-27.48%
|
-50.90%
|
-10.16%
|
-5.53%
|
3.90%
|
Please note that all performance figures are showing net data. Source: Bloomberg / HANetf. Data as of 30/04/2022. Performance before inception is based on back tested data. Back testing is the process of evaluating an investment strategy by applying it to historical data to simulate what the performance of such strategy would have been. Back tested data does not represent actual performance and should not be interpreted as an indication of actual or future performance. 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.
Learn more about our Emerging Markets ETF