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Emerging Markets Internet and Ecommerce Monthly Report | August

 

  • The Emerging Markets and Ecommerce UCITS ETF (EMQQ) continues to solidify its hold on the #1 spot for all EM ETF’s for YTD and 1yr performance according to ETFdb.com as of Aug 1, 2020. [1]  
  • Despite over 40% gains YTD, we see the macro secular trends that EMQQ captures as still being in its infancy. Over one billion people in the developing world are yet to obtain a smartphone indicating, just how early we are in this growth cycle.
  • We are now seeing ecommerce in the less developed markets begin to finally catch up to demand as initial supply chain disruptions and logistics problems are being solved. (ie: India’s food delivery platforms and Africa’s ecommerce leader Jumia) 
  • U.S. China relations enter a new phase as Secretary of State Mike Pompeo’s July 23rd speech aimed at escalating the conflict from a trade/economic focus to an ideological one, going so far as to dust off an old Reagan cold war mantra, “trust but verify” and replacing with his own “distrust and verify”. [2]  
  • It is clear now the administration views this adversarial strategy as advantageous heading into November’s election and will continue in this posturing towards the likes of Huawei, TikTok and others using the national-security threat label.
  • EMQQ companies best positioned in these emerging geographies are now starting to be recognized by local governments and investors as the cornerstones to their future economies, reflected in new protectionist policies and now market appreciation.

 

The Emerging Markets and Ecommerce UCITS ETF (EMQQ) has posted a return of over 60% for the trailing year, managing to further consolidate its lead as the best performing EM ETF in the category.

Leading the contribution to performance YTD has been the rapidly growing Chinese ecommerce platform Pindoudou (PDD) posting a return of over 140% as its targeting of lower tier cities and an increasingly price sensitive consumer has proved beneficial. Two other notable contributors were Singapore based Sea ltd (SE) and Argentina based MercadoLibre posting YTD returns of 204% and 97% respectively. Both companies are prime examples of how these digitised business models are borderless and represent an opportunity far beyond what a weighting on a fact sheet indicates.

 

EMQQ Emerging Markets Internet & Ecommerce UCITS ETF Performance

 July* YTD** 12 Month*** 
 9.08%  44.72%  59.93%

Past performance is no guarantee of future performance 
Source: Bloomberg, HANetf *July figures based on 01.07.20 - 31.07.20 **YTD figures based on 01.01.20 - 31.07.2020 ***12 Month figures based on 30.06.19 - 31.07.20

 

Sea Ltd, who operates a gaming, entertainment and ecommerce platform, has broadened its offerings to reach most of Southeast Asia including Indonesia, Vietnam, Thailand, and Philippines.[3] MercadoLibre similarly has become the ecommerce leader in most of central and South America covering over 18 countries including Argentina, Brazil, Chile, Mexico, Peru and Panama.

On an absolute basis, EMQQ’s best performer was a recent addition from the June rebalance in GSX Tech Edu (GSX) who posted YTD returns in excess of 305%. The China-based online education platform is a pure play into the rapid adoption and utilization in the country to promote online and at home education options while navigating the pandemic. The online education segment has proven one of the stronger subsectors within EMQQ this year as well as the fintech and payment platform segments. Both strong secular trends we anticipate continuing over the long run.

As the consumer flight to digitize continues globally, we are now seeing geographies with moderate conversion rates to online consumption now accelerating their adoption. The catch up in this new consumer behaviour is now becoming a permanent fixture with most consumers planning to continue the mobile behaviour even after brick and mortar reopen, signalling a permanent shift that ultimately is beneficial to EMQQ. [4]

 

EMQQ vs Key EM Competitors- as of 31/08/2020

(For illustrative purposes only)

 

Source: Bloomberg, July 31, 2020

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.

 

Industry News

Ant Group IPO: Anticipated to be one of the largest IPO’s in history, Alibaba’s fintech arm Ant Financial is looking to forgo the trend of recent years of listing in the U.S. and instead targeting a HK and Shanghai listing. [5]

DiDi IPO: One of the largest private companies in the world, the ride hailing unicorn from China is rumoured to be getting pressure from investors like SoftBank and Hillhouse to go public. A target of October or November could be the window and most likely listing in HK due to the recent China/US tensions. [6]

India Increasing Domestic Technology Protection:

Following a fatal military skirmish on the northern border with China, India’s Modi has moved to retaliate in blocking a number of Chinese made apps within the country. The move has proven a strategic one as Modi’s government has taken stronger action to protect domestic tech companies as well as a political push back on the Chinese. [7]

As the developing world continues its digital transformation, the spread of access and cost-effective connectivity is empowering a new generation of entrepreneurs that don’t need to move to Silicon Valley to be successful. It can now be found anywhere from Bengaluru India, Nanjing China, Mexico City Mexico, Buenos Aires Argentina and Lagos Nigeria, with the story getting a whole lot bigger when the rest of the world comes online.

 "The entrepreneurial effect multiplies itself in each one of the 18 countries where we are present and it becomes real in the half a million Latin American families who live from selling in Mercado Libre.”

Marcus Galperin – CEO of MercadoLibre [8]

 

For illustrative purposes only
Source: eMarketer May 2020

 

Top 10 Constituents  Weight % 

Tencent Holdings Ltd

7.66% 

Alibaba Group Holding Ltd

7.60% 
Meituan Dianping 6.68% 
Naspers Ltd 6.42% 
MercadoLibre Inc 6.22% 
Pinduoduo Inc 5.93% 
NAVER Corp 4.86% 
Prosus NV 4.58%
NetEase Inc  4.23% 
JD.com Inc  4.15% 

Source: Bloomberg/ HANetf. Data as of 31/07/2020

 

Regional Breakdown Weight 
Asia 77.29% 
South America  9.61% 
Africa  6.82% 
Europe  6.28%

Source: Bloomberg/ HANetf. Data as of 31/07/2020

 

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.

EXCHANGE  BB CODE  RIC  ISIN  CURRENCY  INCOME 
 London Stock Exchange

EMQQ LN 

EMQQ.L 

IE00BFYN8Y92

USD

Acc

London Stock Exchange

EMQP LN 

EMQP.L 

IE00BFYN8Y92

GBP

Acc 

Borsa Italiana

EMQQ IM

EMQQ.MI 

IE00BFYN8Y92

EUR

Acc

XETRA

EMQQ GY

EMQ1.DE

DE000A2N5XA8

EUR

Acc 

 SIX

EMQQ SW 

EMQQ.S

IE00BFYN8Y92

CHF

Acc 

 

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