The Emerging Markets Internet & Ecommerce ETF EMQQ is up nearly 40 percent year to date, a performance that puts the exchange-traded fund ahead of the MSCI Emerging Markets by a better than 2-to-1 margin.
Engaging With EMQQ
EMQQ's components “must derive their profits from e-commerce or Internet activities and include search engines, online retail, social networking, online video, e-payments, online gaming and online travel,” according to the issuer.
Data suggest global investors are bullish on some EMQQ holdings, including familiar names such as Alibaba Group Holding Ltd BABA, Tencent Holdings Ltd. and South Korean conglomerate Samsung Electronic SSNLF.
Holdings And Allocations
“Information-technology shares in the MSCI Emerging Markets Index have surged 35 percent this year, trouncing the 20 percent gain for the Nasdaq 100 Stock Index,” reported Bloomberg. “Like in the U.S., the rally has been led by just a few of the biggest names, with Samsung, Tencent, Alibaba, Taiwan Semiconductor Mfg. Co. Ltd. (ADR) TSM and Naspers Limited (ADR) NPSNY accounting for almost a third of the emerging market gauge’s advance this year.”
EMQQ focuses on truly emerging, emerging markets and as a result does not feature much exposure to the more advanced, lower beta South Korea and Taiwan. Still, the ETF allocates nearly a quarter of its combined weight to Tencent, Alibaba and South Africa's Naspers. Naspers is a play on Tencent as the South African company owns a stake in the Chinese Internet giant. One of EMQQ's top 10 holdings is a South Korean firm while five are Chinese.
Setting Itself Apart
Many emerging markets lack traditional retail infrastructure as seen in the West, meaning the potency of developing world e-commerce is a credible long-term investment theme.
“The arrival of Ecommerce in the developing world is manifesting itself in significant revenue growth and value creation,” according to research from EMQQ's issuer. The revenue of the companies in EMQQ grew from $13 billion in 2009 to $73.8 billion in 2014 — a total 5-year growth of 468 percent and an average annual growth rate of 41.5 percent. And while the rate of revenue growth is likely to slow over time, it was still an impressive 39.9 percent in 2014.”
Investors are responding. EMQQ's year-to-date inflows are close to $110 million of which more than $104 million have arrived in the current quarter.Related Links: Buyback ETF Deals With Declining Repurchases
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