Emerging Markets and Ecommerce Monthly Report | March
- Kuaishou or “quick hands” is a short form video sharing
and live streaming platform in China that was added to EMQQ in February via the
fast-track IPO rule bringing the total number of holdings for the index to 97.
- China’s National People’s Congress announced a projected
GDP growth in excess of 6% for 2021.
Similarly, the IMF is projecting the
emerging market economies to grow at a real GDP of 6.0% vs 3.9% for advanced
- India’s IPO pipeline continues to heat up with a
fintech name in Policybazaar, India’s online insurance/financial services
aggregator. It is looking to list in Mumbai but is open to a dual listing as
SEBI continues to relax listing regulations
- Ant Group has finally reached an agreement with
regulators to become a financial holding company, potentially opening the door
to an IPO later this year. The full extent of damage inflicted on its valuation
is yet to be known
- India’s Modi has taken away the very thing he so
strongly advocated for. Recent farming legislation that’s created a wave of
protests saw Modi attempt to cut internet access to over 52 million in attempt to
- As EMQQ approaches
its’ 3rd year anniversary with Han, the strategy remains the #1
performing EM Index for the category as of the end of February for YTD, 1yr,
Past performance is no guarantee
of future performance.
Source: Bloomberg, Solactive, HANetf
Month figures based on 29.02.20 -28.02.21.
The Emerging Markets and
Ecommerce UCITS ETF (EMQQ) has posted a trailing 1 year return of over 100% as
of February 2021 and remains the best performing Emerging Markets ETF in the category. Past
performance is no guarantee of future performance.
Coming off a strong year
returning over 80% for calendar year 2020, the first two months of the year
continued to post strong returns up over 10% combined. Kuaishou Technologies was added in February
via the fast-track IPO index rule, adding a holding to the index that has
posted over 150% from going public until the end of February. The leading
contributors to our Emerging Markets ETF performance current yield was Tencent and Baidu, both posting over 17%
and 30% respectively. We’re also seeing some
strength back in the online travel and booking names with China’s Trip.com and
India’s MakeMyTrip returning over 16% and 13% respectively thus far for the
short calendar year 2021.
The two largest detractors for
the two months were Delivery Hero and Allegro dropping over 17% and 24%
respectively, however in context to both their impressive runs in 2020 posting
a return of over 90%, a breather is understandable.
Past performance is no
guarantee of future performance. Source of all data: Bloomberg
EMQQ Emerging Markets Internet & Ecommerce UCITS ETF (Acc)
EMQQ Emerging Markets Internet & Ecommerce Index™
Past performance for the index is in USD. 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. Source: Bloomberg / HANetf.
Data as of 28/02/2021
US Executive Orders: Biden appears to be putting a
pause on any delisting or further divestment actions on Chinese listings in the
US. After a dizzying flurry of executive orders, rumours and delisting
targets over the last few months, it seems the current administration will delay
and potentially reverse some of the actions taken. Immediately after the inauguration, the three
delisted Chinese telecom companies all made appeals to be relisted in the US. We
are uncertain as to what will come, but clearly a more tactical and less brute
force approach is being taken. Also, our emerging markets ETF does not contain
any of the “military linked” names in the previous executive order.
“Too Good at Capitalism”
Antitrust Regulation: China and Europe seem to be
the early movers on issuing fines and imposing regulation. Although much is
still to be determined, targeted fines, further protectionism and encouraged
competition to likely be the outcome. Ultimately this is not just a China issue
as governments across the globe are grappling with how to manage these newly
disruptive yet highly successful business models.
US names face the same issues with potentially greater implications given their
global presence as we see Europe imposing big fines and regulations on the
likes of Amazon and Google with more sure to come.
The IPO Party Coming
to India: India has taken demonetization efforts and deregulated its
financial system to allow for more of its home-grown tech companies to finally
IPO on its exchanges. With a healthy pipeline of unicorns and well mature
private ecommerce and internet names, we see the Indian tech landscape to have
a coming out party and accelerate its domestic talent in the space over the
next 12-24 months.
Modi’s Digital Conundrum: India’s Modi has put
himself in a digital vs democratic tug of war. Recent farming legislation
that’s created a wave of protests saw Modi attempt to cut internet access to
large regions to quell the protests. After heavily promoting the advancement of
the digitized economy, he subsequently cut off not just social media to
protesters, but also the very digital economy he has fought so hard to implement,
be it mobile payments, food delivery services, telehealth, and cloud services just
to name a few. This proving such a method of protest control to be both futile and
Kuaishou Fast Track Add: Launched in 2011, Kuaishou
has grown into one of China’s largest video sharing platforms with over 700
million monthly active users. It is the main rival to Douyin, which is known as
TikTok outside of China. During its February debut, the company raised over $5
billion dollars to help fund its ambitious plan to build out a platform that
blends ecommerce, livestreaming and gaming distribution.
Given the scale of the IPO, the company was fast tracked into EMQQ. The
fast-track IPO rule allows EMQQ to add new holdings ahead of the normal
rebalance whose value exceeds $10 billion upon time of its listing.
The Venture Capital Investor Tencent: On March 3,
2021 the Wall Street Journal published an article titled “China’s Tencent
Becomes an Investment Powerhouse, Using Deals to Expand Its Empire” to
highlight the Chinese tech giant’s sprawling portfolio of lucrative
While the company is best known for WeChat, the one-stop Super App, and its
large gaming portfolio, the company has also made a series of thoughtful bets
across the global digital marketplace. Its portfolio includes lots of private
and public companies ranging from JD.Com and Kuaishou (mentioned above) to Snap
Inc and Spotify. The Wall Street Journal estimates the company’s investment
portfolio has a market value in excess of $200 billion. Tencent has become of
the biggest venture capital investors in internet businesses in China and
across emerging markets, providing a robust pipeline of future IPOs.
Revolution Just Getting Started: When McKinsey and Co published a research piece back
in 2012 on the rising emerging market consumer wave, they called it “the
biggest growth opportunity in the history of capitalism”. A hyperbolic claim to
be sure but a statement that planted the seed that lead to the creation of the Emerging Markets ETF and now the best barometer to providing the evidence for such a claim. Having
posted performance numbers that put the index at the top of its respective
category, we see 2021 as a unique tipping point in this global digital
revolution story. With China providing the lion’s share of growth in the
ecommerce and internet space for the past decade, we are now seeing the second
leg of growth coming from geographies that were slower to adoption but
comparably powerful in population and scale. The likes of India, Africa,
Southeast Asia, and South America will drive the second half of this
transformational story as hundreds of millions have yet to obtain a smartphone.
Gen-Z Will Write
the Next Chapters: This next wave will come from the world’s youth with 9 out of 10 Gen Z
coming from emerging markets. The consumption preferences that will be shaped
by this demographic will prefer not to use cash but mobile payments, prefer
streaming content over any cable provider, watch more esports than traditional
sports, and certainly not go out to a mall to but clothes.
The IPO Party
Coming to India: India has taken demonetization efforts and deregulated its financial
system to allow for more of its home-grown tech companies to finally IPO on its
exchanges. With a healthy pipeline of unicorns and well mature private
ecommerce and internet names, we see the Indian tech landscape to have a coming
out party and accelerate its domestic talent in the space over the next 12-24
Where the Growth is: Broad based indexes for EM we believe
represent a significant value trap being saturated with SOE’s and consequently
depressed valuations with little growth. The isolated internet & ecommerce
names represent some of the strongest growth rates not just for a few names but
the entire sector.
For illustrative purposes only. Capital at risk. Source: Bloomberg
as of 28.02.2021
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 serving Emerging Markets. It seeks to offer investors exposure to the
growth of online consumption in the developing world. EMQQ holdings operate in
diverse markets such as India, China, Brazil, Turkey, Nigeria and Indonesia, to
name a few. To be included, the companies must derive their profits from
Internet or Ecommerce activities; constituents are broad and diverse including
search engines, online retail, social networking, online video, e-payments, cloud
computing, online gaming, travel and numerous others.
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