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Long-Run Growth Will Continue For EMQQ


  • EMQQ's industry focus will position it well to benefit from the long-run growth of internet usage and e-commerce spending in emerging markets.
  • It also minimizes exposure to common emerging market risks such as commodities, complex supply chains, and bad loans.
  • In spite of unfavorable sentiment towards emerging markets, EMQQ has outperformed the S&P 500 over the past 3 years.
  • I'll be looking to buy EMQQ if market weakness continues.

The Emerging Markets Internet and E-commerce ETF (NYSEARCA:EMQQ) has a unique industry and geographical focus could make it especially well positioned to benefit from key long term demographic and technological trends. The current market turmoil from the coronavirus outbreak might is unlikely to stop the key growth drivers for EMQQ.

Growth Potential

EMQQ’s target index includes only companies that derive more than 50% of their revenue from internet or e-commerce in emerging and frontier markets. The businesses in the index generate revenue online from a variety of products including search, retail, video, e-payments, and online gaming.

According to research from McKinsey & Company, half of the world increase in consumption between 2013 and 2025 is expected to come from emerging markets. Investing in the internet and e-commerce sectors is the best way to capture the rising importance of emerging market consumers.

Internet and cell phone access is increasing rapidly across the emerging world. Greater internet access is coinciding with greater acceptance of e-payments(note that that two of EMQQ’s largest holding have major e-payments businesses). Greater acceptance of e-payments is highly correlated with an increase in online commerce. Internet access becomes more important as more people get it, due to network effects. This creates a self reinforcing feedback loop benefiting EMQQ’s holdings. Although internet usage in the developed world is nearly ubiquitous, in emerging markets, there is still a massive runway for growth.

This table shows how low internet penetration is in Asia, Africa, and Latin America compared to Europe and North America.

Source: Internet World Stats

A 2018 Credit Suisse report highlighted the magnitude of the emerging market e-commerce opportunity. The trends they highlighted are continuing in full force. For example, urbanization in emerging markets is driving greater online shopping. This is especially true in for “fast moving consumer goods” (FMCG), including beverages, food, and toiletries. online food delivery

This article was written by

Much more than closed end funds, look for hidden value, especially in investment companies and macroeconomic or industry dislocations.Areas of focus include: -NAV discounts-Liquidations-Fund restructurings-Income strategies-Shareholder activism-Macro opportunitiesI previously submitted individual stock research on Seeking alpha under the (no longer active) Afanti Arbitrage account.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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