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A New ETF to Play Rapid Emergence of Emerging Market Internet

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Emerging markets and e-commerce are the two areas that could be the global growth story in the next few years, given the after effects of the coronavirus pandemic. In any case, over the past decade, emerging markets’ role in global consumption considerably beat that of developed markets, and are expected to account for 84% of global consumption by 2023, per a Global X article.

Even amid the pandemic, emerging markets are expected to recover faster than developed economies.The emerging market and developing economy group is expected to contract 3.3% in 2020 and the advanced economies are expected to shrink 5.8%.

In such a scenario, Global X recently launched an ETF called Emerging Markets Internet & E-commerce ETF (EWEB - Free Report) .

Global X Emerging Markets Internet & E-commerce ETF (EWEB - Free Report) in Focus

The fund looks to track the Nasdaq CTA Emerging Markets Internet & E-commerce Net Total Return Index. It invests in companies positioned to benefit from the increased adoption of Internet and E-commerce technologies in emerging markets. The fund holds 49 stocks, with Pinduoduo (12.16%), Meituan (8.54%), JD.Com (8.38%) being the top three holdings.

China takes about 74% of the fund, followed by Brazil (6.93%) and South Korea (6.80%). Consumer Discretionary (53.71%) and Communication Services (39.45%) are the top two sectors of the fund. It charges 65 bps in fees.

How Does It Fit in a Portfolio? 

Stocks that deal in Internet-related activities in the emerging markets have been performing great amid the coronavirus pandemic as it has less to do with human contact. The pandemic favored the online retailing and digital payments industry as the stay-at-home trend boosted demand for online shopping, video gaming, esports and most importantly work-and-learn-from home.

Emerging markets are the key contributors to global economic growth. In 2018, 74% of the global growth was attributable to emerging market economies, largely driven by a rapidly growing middle class of internet-connected consumers,per IMF, as quoted on Global X.

The Global X article continued to elaborate that in 2019, Amazon sold more than $7 billion worth of goods through its platform on Prime Day while in China, Alibaba’s 2019 estimated sales were $38.4 billion recorded on the nation’s Single’s Day. It shows the increasing demand for e-commerce in China  (read: 5 China ETFs to Mingle With on Singles' Day).

Is There Any Competition? 

There is already a fund called Emerging Markets Internet Ecommerce ETF (EMQQ - Free Report) available in the space. This fund had debuted in November 2014 and has amassed about $1.19 billion so far. The fund charges 86 bps in fees. It houses Meituan (8.83%), Pinduoduo (7.68%) and Tencent (7.35%) in the top three spots. Here too, China takes more than 50% of the fund. So, no wonder, this fund will pose a threat to the newbie.

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