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Emerging Markets Internet and Ecommerce Monthly Report | November

 

  • With less than 48 hours until Ant Groups IPO, authorities stepped in to postpone the listing siting changing regulations.[1]  
  • Despite the pause on the Ant listing, the CCP’s meeting last week to craft the next 5-year plan reemphasized the desire to continue the liberalization of the financial system and to allow greater foreign access to its markets.[2]  
  • The Ant IPO will be a serious test for the Chinese Stock Market and could potentially expose a massive flaw in the pricing disparity between the Shanghai and HK exchanges.
  • With the pandemic accelerating again in Europe and the US, the stark divergency in recovery is only growing as China and other Asian economies seem to be managing both the human and economic impacts far better than most. 
  • EMQQ, our emerging markets ETF looks to be grow its India exposure as Paytm, Zamoto, Delhivery, FlipKart and others are all looking to go public 
  • EMQQ remains the #1 performing EM Index for the category as of the end of September for the YTD, 1yr, and SI time frames.[3]

 

Performance Review

The Emerging Markets and Ecommerce UCITS ETF (EMQQ) has posted a trailing year return of over 70% and remains the best performing emerging markets ETF in the category.[4]

EMQQ rebounded from a negative September to post over 5% return for the month of October, beating the MSCI EM index. The best 5 contributors to EMQQ were, Netease Inc (China), Meituan Dianping (China), Pinduoduo (China), and MercadoLibre (Argentina) and Tencent (China), showcasing the continued strength in gaming and online consumption growth across the more rural areas of China targeted by Pinduoduo. One of the leading underperformers has, unsurprisingly, been the travel and ticketing leader in China: Trip.com. However, given the Chinese turnout of domestic travel during the national holiday and Mid-Autumn festival, we anticipate a slow but sustained recovering in this subsector for our emerging markets ETF.

 

EMQQ Emerging Markets Internet & Ecommerce UCITS ETF Performance

October  YTD*  12 Month** 
5.69%  55.71%  70.16% 
Past performance is no guarantee of future performance.

Source: Bloomberg, HANetf *YTD figures based on 01.01.20 - 30.10.20 **12 Month figures based on 30.09.19 -30.10.20

 

With the Ant Group’s IPO now on hold, it’s important to highlight how the digital payments story has spread beyond China and throughout EMQQ’s holdings, becoming ubiquitous across emerging economies.

The growth opportunity presented by Ant should serve as an indicator of what’s to come in other geographies like India’s Paytm, South America’s MercadoLlibre and StoneCo, Africa’s Jumia, and Eastern Europe’s Yandex all aggressively expanding in the space.

On the cusp of a digital revolution, emerging markets are only now beginning to transform consumer behaviours in a way that is allowing all areas of the economy to be impacted; be it healthcare, education, banking, and even how we shop for groceries. With fintech at the heart of all these transactions, the potential for the space is significant and will continue to prove McKinsey and Co’s prediction back in 2012 that the emerging market consumer wave to be “the biggest growth opportunity in the history of capitalism”.[5]

As the digitisation wave spreads, India seems to be the next major opportunity in the global fight for the prize of a billion digital consumers up for grabs, with the only difference to China being a more open market and intense international competition. This potential is not lost on the Indian government, however, as Modi appears to be moving in the Chinese direction of protectionist policies as he recognizes the incredible domestic potential to incubating homegrown names over global rivals.

For illustrative purposes only. Source: NASSCOM Insights, 2020

 

The UPI, or Unified Payments Interface, was established in 2016 to facilitate digital and mobile based payments and has seen strong growth amongst the connected population, yet with still only 25% of their 1.4 billion population connected via a smartphone, the lions share of upside still remains.[6]

 

For illustrative purposes only. Source: NASSCOM Insights, 2020

 

The Emerging Markets Internet and Ecommerce UCITS ETF 

Total Return NAV to Date (up to 30/10/2020)

 

1M

3M

6M

YTD

12M

Since Inception

EMQQ Emerging Markets Internet & Ecommerce UCITS ETF (Acc)

5.69%

7.59%

55.84%

55.71%

70.16%

76.36%

EMQQ Emerging Markets Internet and Ecommerce Index (NTR)

5.78%

7.87%

56.59%

56.95%

71.94%

81.09%

 

EMQQ vs Key EM Competitors- as of 10/30/2020 (For illustrative purposes only)

Source: Bloomberg, Oct 30, 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 if 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.[7]

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.[8]

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.[9]

 

Constituent News

Top 10 Constituents

Weight %

Meituan

9.36%

Alibaba Group Holding Ltd

8.62%

Tencent Holdings Ltd

7.92%

Naspers Ltd

6.31%

MercadoLibre Inc

6.27%

Pinduoduo Inc

5.43%

JD.com Inc

4.95%

NAVER Corp

4.59%

Prosus NV

4.42%

Baidu Inc

4.12%

 

Region Breakdown

Weight

Asia

78.17%

South America

9.17%

Africa

6.82%

Europe

5.84%

 

Sector Breakdown

Weight

Information Technology

5.95%

Financials

1.19%

Industrials

0.56%

Communication Services

39.04%

Consumer Discretionary

50.22%

Health Care

3.03%

Source: Bloomberg / HANetf. Data as of 30/10/20

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. Our emerging markets ETF 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

IE00BFYN8Y92

EUR

Acc

SIX

EMQQ SW

EMQQ.S

IE00BFYN8Y92

CHF

Acc

 

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