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The Case For Emerging Markets e-commerce

The Blue Water Team

Exchange Traded Concepts, LLC makes a compelling case for their ETF - The Emerging Markets Internet & e-commerce ETF (EMQQ).  Countries such as Brazil, China, India, Indonesia, Nigeria, and Turkey are represented in the fund.  Unlike traditional emerging markets funds, EMQQ only includes companies that focus on e-commerce and other internet activities like online gaming, social networking, online retail, and mobile payments.  

Exchange Traded Concepts discuss why emerging markets matter and where growth has been trending in emerging markets.  The consuming class of people in emerging markets is growing rapidly.  By 2025, consumption will account for $30 trillion, or roughly half of the world's total.  That consumption is expected to be largely driven by technology as their brick and mortar retail space is underdeveloped.  Most consumers have never owned a car, shopped in a big box store, or owned a computer.  However, the decrease in cost of smartphones and improved wireless broadband is providing growing access to the internet for a large percentage of the population.  As technology and cell phone usage increases, e-commerce companies are enabling consumers to bypass traditional retail in favor of more modern online shopping.

The Emerging Markets Internet & E-commerce ETF holds roughly 80 companies and caps its largest holding at an 8% weighting in order to promote more diversification within the fund.  Its expense ratio is 0.86%, which may be considered on the high side, but emerging markets are always a little more expensive and this is a specialty fund.

At Blue Water, we typically include emerging markets in our portfolio allocations.  We generally start with a core emerging markets fund for broad exposure and add one or more specialty funds for exposure to dividend focused companies, low volatility, ESG, or technology & thematic trends.  EMQQ is one of our fund choices for investors looking to add more technology & thematic trends to their portfolios.