Covid Online Boom Just the Start for Top Emerging-Market ETF
(Bloomberg) -- An emerging-market exchange-traded fund focused on e-commerce and internet stocks trounced peers this year as consumers embraced the web when the pandemic kept them at home.
The $1.45 billion Emerging Markets Internet and E-commerce ETF, known as EMQQ, posted a total return of almost 74%, the most among U.S.-based passive instruments that invest in the developing world, according to data compiled by Bloomberg. Shares of the ETF have more than doubled from a low in March, reaching an all-time high of $63.45 earlier this month.
“When the coronavirus comes to town, you do even more on your phone than you did before -- and that’s true all over the world,” said San Francisco-based Kevin Carter, who founded the ETF in 2014. “This is where the growth is.”
While lockdowns helped accelerate the adoption of digital schooling, shopping, entertaining and communicating in emerging economies, there is still plenty of growth left. The coming years should bring an even deeper turn toward digitalization amid younger populations and rising innovation, Carter said in an interview.
E-commerce company Jumia Technologies AG, which operates across Africa, led the advance among 73 of 97 equities tracked by the fund with a 548% gain in 2020. Singapore-based information technology firm Sea Ltd. and Chinese online entertainment stock Bilibili Inc. were the second- and third-best performers in the ETF this year.
Investors poured $611.20 million into EMQQ over the course of 2020 as emerging-market internet and e-commerce stocks led a recovery after the shock of Covid-19 hit markets.
As a whole, emerging-market ETFs notched about $2.47 billion in net inflows this year as optimism for a bullish 2021 erased outflows of as much as $20 billion. While funds rebounded in the final stretch of the year, EMQQ still stands out as a winner when compared to the market’s titans, such as the VWO, the IEMG and EEM, which are still on track to end the year with outflows.
The question is whether the momentum behind EMQQ will last. Investors from Aberdeen Standard Investments to UBS Global Wealth Management expect a recovery to broaden out in the coming year, benefiting “old-economy” value stocks. Even so, Carter said the growing number of online consumers in emerging economies, as more people gain access to the internet and smart-phones, will support the ETF.
“This story was already booming before the coronavirus came to town,” he said. “It remains the story, pandemic or no pandemic.”
©2020 Bloomberg L.P.