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Emerging Markets and Ecommerce Monthly Report | January

 

  • Jack Ma’s business empire getting pressured from all angles. The Chinese have clamped down on Ant Group, and now appear to be implementing new antitrust regulations on Alibaba with the US threatening to ban AliPay use and rumoured to be adding Alibaba amongst others to the mandatory divestment executive order. We place a slim to nil chance this gets implemented even if announced in symbolic gesture that the next administration will not implement.
  • Global tech antitrust issues are now taking main stage as governments across Europe, China, US, India and others grapple with the balancing act of imposing regulations on the very names and sector that have contribute greatest to their economic growth.
  • With the pandemic accelerating again in Europe and the US, China and other Asian Emerging Markets appear to be avoiding the worst of it leaving them in a better fiscal and economic condition to rebound on the other side
  • We believe this moment in time to represent what historians will look back and identify as the inflection point that ultimately realigned Asia as the centre of the global economic power structure
  • India is poised for a breakout year with over a dozen unicorns in the space looking to take advantages of easing listing regulation.
  • EMQQ rebalance in Dec resulted in 20 new adds and 7 removals leaving the new Index with a total of 96 holdings.

 

Performance Review

The Emerging Markets ETF (EMQQ) has posted a trailing year return of over 80% and remains the best performing EM ETF in the category. [1]

EMQQ finished the year strong posting a 6.83% return for the last month of the year to finish at 81.08% YTD. The best contributors to EMQQ for the year were: Pinduoduo of China, returning well above 300%, MercadoLibre of Argentina and Meituan of China posting over 190%, JD.com of China, and finally Sea Ltd, the Singapore-based ecommerce leader returning over 390%. On an absolute basis, the greatest performer in the Index was Africa’s ecommerce leader Jumia and the greatest detractor was Pheonix Tree Hlds who’s online real estate rental business suffered in China due to lockdowns.

As we look to 2021, we want to cover a few important trends we see impacting the space with wide implications not just for the Emerging Markets ETF (EMQQ) and Emerging Markets but globally as well. We’ll touch on the growing push for antitrust regulation on the tech giants of the world and the implications of loosening IPO rules for India’s numerous unicorns itching to go public.

Source of all data: EMQQ / Bloomberg

 

Ecommerce UCITS ETF Performance


December*


YTD
**


6.83%


81.08%

Past performance is no guarantee of future performance. Source: Bloomberg, HANetf

* December figures based on 01.12.20 – 31.12.20

**YTD figures based on 01.01.20 - 31.12.20

 

Too Successful: Antitrust Regulations Spreading

When McKinsey and Co published a research piece in 2012 on the rising emerging market consumer wave, they called it “the biggest growth opportunity in the history of capitalism”.[2] A hyperbolic claim to be sure, but we believe this statement to be well on its way to proving itself out as EMQQ continues to prove the evidence. The opportunity of the emerging markets story is far from losing steam, with projected growth rates, as shown in the graph below, over 30% for 2021.

 

China and Europe seem to be the early movers on issuing fines and new regulations; however, much is still to be determined if going forward, with further protectionism or encouraged competition being the result. We want domestic ecommerce leaders to develop in places like Indonesia, Vietnam, South Africa, Argentina, India and the rest. Ultimately this is not just a China issue as governments across the globe are grappling with how to manage these new disruptive and highly successful business models. US names face the same issues with potentially greater implications, given the global presence, as we see Europe imposing big fines and regulations on the likes of Amazon and Google, with further regulation sure to come.[3]

 

2021: The India Take Off

We anticipate 2021 to be India’s ‘coming out party’, as a sizable list of unicorns look to take advantage of loosening listing regulations in the country.

With a minimum three years of profitability being required amongst a host of other high hurtles for fast growing tech names, the Modi government has become increasingly aggressive in loosening access to capital markets for domestic names, while increasing protectionist policies on foreign names. For reference, Amazon did not reach profitability for the first time until 2001 after its launch in May of 1997. As the digitization wave spreads throughout emerging markets, India seems to be then next major opportunity in the global fight for the prize of nearly a billion digital consumers are up for grabs. Coupled with plummeting cost barriers, both in data and smartphone prices, the foundational elements we saw setting up China 10 years ago appears to be taking shape in India now as well.

For illustrative purposes only. Source: https://www.ispreview.co.uk/index.php/2020/05/uk-ranks-59th-out-of-228-countries-for-price-of-1gb-mobile-data.html

 

For illustrative purposes only. Source: https://newzoo.com/insights/rankings/top-countries-by-smartphone-penetration-and-users/

 

 

Total Return NAV to Date (up 31/12/2020)

 

1M

3M

6M

YTD

12M

Since Inception

EMQQ Emerging Markets Internet & Ecommerce UCITS ETF (Acc)

6.83%

22.92%

36.48%

81.08%

81.08%

105.10%

EMQQ Emerging Markets Internet and Ecommerce Index (NTR)

6.92%

23.24%

37.17%

82.86%

82.86%

110.98%

 

EMQQ vs Key EM Competitors

Data as of 31/12/2020

 

 

For illustrative purposes only. Source: Bloomberg. Data as of 31/12/2020

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.

 

Constituent News

Top 10 Constituents

Weight %

Pinduoduo Inc

8.52%

Tencent Holdings Ltd

7.14%

Alibaba Group Holding Ltd

6.72%

JD.com Inc

6.36%

Meituan

5.79%

MercadoLibre Inc

5.64%

Naspers Ltd

4.84%

Baidu Inc

4.25%

Prosus NV

4.14%

KE Holdings Inc

4.03%

Source: Bloomberg / HANetf. Data as of 31/12/20

 

Region Breakdown

Weight

Asia

78.33%

South America

9.92%

Africa

5.12%

Europe

6.48%

MENA

0.14%

Source: Bloomberg / HANetf. Data as of 31/12/20

 

Fund Details

The (EMQQ) Emerging Markets 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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