The first ETF to concentrate solely on the niche Internet and ecommerce in the emerging markets launched this week. The Emerging Markets Internet and Ecommerce ETF EMQQ began trading on Thursday on the NYSE Arca Exchange.
The new ETF is designed to give investors exposure to ecommerce sectors in emerging markets, one of the fastest growing markets around the globe. Big Tree Capital, an investment company that specializes in frontier and emerging markets, created the index that the ETF tracks.
The ETF is composed of 42 global companies with 31 are U.S. venture-capital-backed and 31 trade on the NYSE or NASDAQ exchanges. There are no state-owned enterprises in the ETF’s portfolio, making it unique compared to other top emerging market ETFs.
The top five holdings include Alibaba BABA, Tencent, Naspers Holdings Ltd, JD.com JD, and Baidu BIDU.
The Internet and ecommerce business model is a rather favorable one at this time, bypassing the traditional approach to consumption. The emerging market aspect of the ETF offers strong economic growth while the Internet and ecommerce offers exposure to a sector characterized by less debt and a younger population.
Big Tree Capital timed the release of their new ETF perfectly, two days after China’s singles day (11/11), which is a valentines day for single people and the biggest online shopping day of the year for China. BABA one of EMQQs top holdings supported $9.3 billion in sales just on singles day alone.
Big Tree Capital CEO Kevin Carter has this to say about his firms new ETF, “The indexes used by the biggest Emerging Markets ETFs have lots of differences from the index tracked by EMQQ. They hold hundreds of state-owned companies including massive banks and oil companies, while most of Internet and ecommerce companies are excluded. The EMQQ index helps investors get more exposure to the growth of online consumption in the developing world.” He also noted that he believes that emerging markets are severely underweighted by American investors, accounting for only 2.5 percent of the average U.S Investors portfolio.
It will be interesting to see how EMQQ will perform going forward. With many investors still cautious about investing in China and emerging markets as a whole; EMQQ may offer a good opportunity to enter while taking part in a booming industry.
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