Emerging Markets Internet and Ecommerce Monthly Report | May

• EMQQ continues to hold the #1 spot for all long-only EM ETF’s for 1 yr performance according to ETFdb.com
• The Internet & Ecommerce sector is the net beneficiary of shifting consumer behaviour brought on by Covid-19
• The secular trends of billions of consumers in EM shifting towards more digitized lifestyles, has only accelerated
• China, EMQQ’s largest country exposure, appears to have navigated the worst of the outbreak and almost back to full capacity
• Growing political risks as U.S. backlash towards China intensifies, mostly politically driven due to the upcoming Nov election

EMQQ Emerging Markets Internet & Ecommerce UCITS ETF Performance

Past performance is no guarantee of future performance.
Source: etfdb.com
* April figures based on 01.04.20 -30.04.20
**YTD figures based on 01.01.20 -5.04.20
***12 Month figures based on 5.4.19 -5.04.20

Performance Review

Monthly Performance of EMQQ /EEM

• April: 11.39% / 7.35%
• March: -7.92% / -15.77%
• Feb: -2.81% / -3.78%
• Jan: -0.25% / -6.15%

The Emerging Markets and Ecommerce UCITS ETF (EMQQ) has performed in a defensive manor through the pandemic and has most of its exposure to the one country (China) that is coming back online from Coronavirus fastest. In a relative world, EMQQ is optimally positioned to benefit over both the short and long term as the digitization of consumers and economies only continues to accelerate.

With China poised to emerge in a stronger position relative to the rest of the world, the Chinese and Southeast Asian economies have driven the EMQQ rebound with the ecommerce, gaming, video, fintech and social platform names leading the way.

Unsurprisingly, the travel and hospitality space suffered the most, however has remained resilient given the shorter duration of being offline and consumer appetite to return. With China being a more mature ecommerce market, we are seeing the largest growth opportunity on a percentage basis in countries that are still in their infancy of mobile and ecommerce adoption such as India, Brazil, South Africa, and Indonesia. These countries are likely to have a much tougher time managing the pandemic and will need to rely on the ecommerce services more heavily and for longer periods.

The EMQQ sector has posted what we believe to be one of the strongest decades of top line revenue growth by any sector in history with an average CAGR in excess of 35% for the past 10 years. Before the pandemic, we projected this growth to continue with an estimated rate in the 20-25% range, now the secular adoption and usage trends have only been supercharged and we anticipate the need to revise that growth projection upward for 2020.

EMQQ vs Key EM Competitors- as of 5/4/2020 (For illustrative purposes only)

Industry News

The Great Confluence Picks Up Speed: COVID-19 has accelerated an already precipitous trend of a rapidly digitising consumer in EM as the digital revolution becomes a necessity or even mandated in many countries. The trend is still in an early stage, with only half the world online at the end of 2019. India only at ~30% of population using smartphones, with ~5,000 new smartphone users every hour coming online vs ~100 in the US.

Source: https://www.bloomberg.com/news/articles/2020-04-14/world-economy-working-from-home-gets-glimpse-of-virtual-future?srnd=premium&sref=5syeFVHp

India is the Big Risk & Opportunity Right Now: A severely underdeveloped healthcare system, coupled with some of the most densely populated regions in the world, could spell disaster if virus gets a footing. The strict social distancing measures and contact tracing advantages China had are slim to none in India.

With points of pain only amplified by the quarantine environment, the desire and need for a more digitised consumption behaviour is accelerated. Coming off a lower base, the adoption and user growth will be immense. Example: <5% of Indians hold credit cards, <2% own cars, and only ~30% of the country owns a smartphone.

India and China Projected to be Only Positive Growth Areas for 2020: (GDP: 1.9% & 1.2%)IMF released updated report last week with GDP growth projections for 2020 to be -1% for EM and -6.1% for Developed

Source: World Economic Outlook, April 2020

Constituent News

JD.com, the Beijing based online-retailer already listed on Nasdaq is looking to raise $2-$3 Billion in secondary listing in Hong Kong. After Alibaba’s success full dual listing in Hong Kong, many other names have looked to follow as U.S. political rhetoric looks to the Chinese listings as targets of punishment in the China-U.S. relations fallout from the pandemic. A bill by Senator Marco Rubio has been proposed to increase scrutiny of the Chinese listed companies and looks to be an extra motivator for further HK listings.

Source: https://www.wsj.com/articles/after-alibabas-magic-float-hong-kong-angles-for-more-tech-listings-11578321206?mod=article_inline
https://www.scmp.com/business/companies/article/3013323/marco-rubios-bill-increase-scrutiny-us-listed-companies-may-be

Source: Bloomberg / HANetf. Data as of 30/04/20

Fund Details

EMQQ Emerging Markets and Ecommerce UCITS ETF, is a UCITS compliant Exchange Traded Fund domiciled in Ireland.

The fund tracks an index of leading internet and Ecommerce companies that serve emerging markets, including search engines, online retailers, social networks, online video, online gaming, e-payment systems and online travel. The fund seeks to provide exposure to the growth of online consumption in the developing world.

Please remember that the value of your investment may go down as well as up and past performance is no indication of future performance.

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Article Date: 19th May 2020.