Market Leading Emerging Market Fund Highlights Rapid Structural Shift to E-commerce in Latin American due to Coronavirus
- The Internet & e-commerce
sector will continue to be 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 and will stabilize at a much higher level on the other side as
seen by the strong revenue growth reported in the latest earnings
- EMQQ UCITS ETF
delivered a 12 month return of 36.38% between 1st June 2019 and 31st May 2020
- 9 new constituents
added and 3 removed in semi-annual re-balance
24th June 2020 - The market
leading Emerging
Markets and Ecommerce UCITS ETF (EMQQ), which is listed on the LSE, XETRA,
and Borsa Italiana, says the Coronavirus pandemic is driving consumer behaviour
online at an accelerated rate, and that demographics and regions that have
remained slow or even resistant to adopting a more digitized lifestyle seem to
have relented and started to convert.
This represents an opportunity for investors, especially in Latin
America where EMQQ says Coronavirus could have the same effect on the region’s
e-commerce sector that SARs did on China’s in the early 2000s.
EMQQ, which
delivered a 12 month return of 36.38% between 1st June 2019 and 31st May 2020
(source: Bloomberg), continues to hold the number one spot for all emerging
market ETFs for one year, three year and five year performance[1]
says Latin America, where online retail sales only account for 5% of total
sales, is expected to surge to 25% in one decade [2].
Past
performance is no guarantee of future performance. When you trade ETFs your
capital is at risk.
Kevin T. Carter, Founder & CIO of EMQQ
said: “Projections of growth in e-commerce highlight the potential that exists
not just in the more mature e-commerce market of China, but the likes of
Brazil, Chile, Mexico, Indonesia, India, Vietnam and many other geographies now
incentivised to accelerate their mobile adoption rates. With the pandemic
driving consumer behaviour online at an accelerated rate, demographics and
regions that have remained slow or even resistant to adopting a more digitized
lifestyle seem to have relented and started to convert.”
Spearheading
EMQQ’s strong performance has been the Latin American leader in e-commerce and
Argentinian based Mercadolibre (MELI). After posting a return of over 45% for
the month of May, MELI rose to be the largest weighting in EMQQ at the end of
the month.
With the virus
continuing to spread in Brazil and elsewhere in Central and South America, MELI
has disproportionately benefited over competitors due to its more robust supply
chains and logistics management that’s been capable of meeting the tremendous
surge in demand.
Kevin T.
Carter, said: “Mercadolibre represents how the macro conditions that
continue to drive China’s digitization, are also being felt throughout
developing economies, but offering the possibility of even greater upside as
they come off a much lower base and much earlier in their digitization cycle.
“In Latin
America, only 34% of consumers under the age of 15 buy goods online, compared
to the 74% in the UK and just over 60% in China. This adoption gap is closing
fast however as the virus has created an extra incentive and catalysing
growth.”
9 new constituents
added in semi-annual re-balance
The Emerging Market Internet &
Ecommerce Index, EMQQ
completed its semiannual rebalance on June 19th 2020, having added 9
new constituents and the removal of 3, resulting in a total of 86 holdings.
Being market cap weighted at 8%
resulted in Alibaba (BABA) and Tencent (0700) being reweighted to the top two
holdings at 8.0% and 7.7% respectively. After being the best performer for the
recent period, rising to the largest holding, Argentina based MercadoLibre
(MELI) was rebalanced back down to the 5th largest holding at
a 6% weight.
Notable additions to the index
include Alibaba Health (0241) which is the flagship health care platform of
parent Alibaba, who has benefited from the global pandemic as consumers moved
online for medical advice and medications. The company was already experiencing
healthy revenue growth, but the current environment propelled recent adoption
and resulted in over 85% year-over-year revenue growth [3].
There is now additional Brazil and South America exposure through Locaweb
Servicos de Internet S.A. based in Sao Paulo. Offering Internet related
services including cloud computing, it has also seen a surge in adoption and
usage growing its revenue 23% YoY [4].
About EMQQ
EMQQ Emerging Markets and EcommerceUCITS 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.