So far in this series, we’ve discussed how demographic changes are transforming emerging markets. Now let’s discuss how to benefit from this transformation and explosion of consumers in emerging markets. One of the best ways to access E-Commerce and Internet growth in emerging markets is through ETFs. One unique ETF option, based on its inclusion criteria, is the Emerging Markets Internet ETF (EMQQ).
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The major difference between EMQQ and other emerging market ETFs is that, while EMQQ holds most of the high-growth Internet and E-Commerce–related companies in its portfolio, other ETFs like the iShares MSCI Emerging Markets ETF (EEM) and the Vanguard FTSE Emerging Markets ETF (VWO) don’t include all of the stocks. The definition of “emerging markets” also varies with the ETF. While EEM considers South Korea as emerging, for example, VWO excludes the country.
EMQQ tracks an index of leading Internet and E-Commerce companies in emerging markets. EMQQ offers investors exposure to the growth of online consumption in markets like India, China, Brazil, Turkey, Russia, and Indonesia. To be included in the portfolio, the constituent companies must derive their profits from E-Commerce or Internet-related activities. EMQQ’s portfolio involves companies operating in segments such as search engines, online retail, social networking, online video, E-Payments, online gaming, and online travel.
The EMQQ ETF’s portfolio comprises some of the most prominent names in the emerging markets industry. The total portfolio included 47 companies as of November 7, 2016. Some of the top names included companies like Alibaba (BABA), Tencent, Naspers, NetEase (NTES), and Baidu (BIDU). As we mentioned, not all of these high-growth companies are included in other major emerging market ETFs.
The Internet and E-Commerce’s long-term story in emerging markets has just begun to unfold, and it has yet to reach its zenith. Consumers in emerging markets are rising fast and increasingly seeking to go online and buy goods and services on mobile phones. The phenomenal growth rates for Internet adoption, smartphone penetration, and E-Commerce should continue to strengthen, powering the next phase of growth for Internet and E-Commerce companies in emerging countries.