Frontier Markets ETF Monthly Report: Key Takeaways
- For the month of April, the FMQQ Next Frontier Internet & Ecommerce Index declined 19.92%, bringing the YTD return to -35.6%. The large drawdown to date is tied to a confluence of factors, chiefly concerns around rising interest rates and frayed geopolitics sparked by Russia’s invasion of Ukraine.
- Second, let’s touch on higher interest rates. Investors fear that a rising cost of capital in the short term will continue to hurt growth stocks. While these fears are already playing out in the market, there does come a point when these long-duration growth assets do indeed become oversold.
- While we understand everyone is trying to tackle these macro concerns, we remind investors that FMQQ is still projected to grow sales 30% in 2022, while its forward multiples continue to compress aggressively. Meanwhile several of the Index’s best performers during the pandemic (like Mercadolibre and Sea Limited) now trade at multi-year lows. Their growth trajectories haven’t changed. But they are cheaper.
Past performance is not an indicator for future results and should not be the sole factor of consideration when selecting a product.
Macro Outlook
- We conceived FMQQ to help investors target a set of emerging markets whose tech sectors are in a much more nascent stage than that of China. We call the rise of these smaller EM markets “the tech third wave.”
- The chart below helps paint the progression we’ve seen in the space over the last two decades. The internet as a business model initially took off in the US with the likes of Amazon, Google and eBay to name a few. Later in the decade, China piggybacked on that with companies such as Alibaba, Tencent and Baidu coming into their own. To surprise of some, China now has the largest e-commerce market in the world, even eclipsing that in the US.
- While the help of growing smartphones penetration and middle-class formation, many of these markets have now hit an inflection point that could help them follow in the footsteps of their predecessors.
- That perspective has and will continue to underpin our long-term optimism in the space.
|
|
1M
|
3M
|
6M
|
YTD
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12M
|
2Y
|
3Y
|
SI
|
|
FMQQ Next Frontier Internet & Ecommerce ESG-S UCITS ETF
|
-20.31%
|
-28.11
|
NA
|
-35.21%
|
NA
|
NA
|
NA
|
-35.21%
|
|
FMQQ Next Frontier Internet & Ecommerce Index
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-19.92%
|
-27.95%
|
-50.75%
|
-35.60%
|
-53.16%
|
-1.10%
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NA
|
-35.60%
|
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 Frontier Markets ETF