ETF Capitalizing on Pandemic Couch Potatoes Beats All EM Peers

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(Bloomberg) -- An emerging-market ETF focused on e-commerce has trounced peers this year as consumers increasingly turn to digital marketplaces because of virus-fueled lockdowns.

Shares of the $556 million Emerging Markets Internet and E-commerce ETF, known as EMQQ, posted a total return of 12.3% this year, becoming the best-performing, U.S.-based passive instrument that invests in the developing world, data compiled by Bloomberg show. The fund tracks online marketplaces, digital-media content and streaming companies that generate most of the revenue in the developing world.

“This is where the growth is in emerging markets,” said San Francisco-based Kevin Carter, who founded the ETF in 2014. “What do you do when the coronavirus comes to your town? That’s pretty clear. You go and do everything on the internet. E-commerce and all things digital have gotten a big boost.”

ETF Capitalizing on Pandemic Couch Potatoes Beats All EM Peers

The fund stands out amid record-shattering outflows in other emerging-market ETFs. Last week marked the 13th consecutive outflow of a record streak that has already cost the funds $21.9 billion, according to data compiled by Bloomberg. Investors have added $96.9 million to EMQQ this year.

The fund has outperformed more direct competitors including the KraneShares CSI China Internet ETF, known as KWEB, which tracks only Chinese firms whose primary business is online. EMQQ’s 42% exposure to e-commerce companies outside China has helped to anchor its advances, according to Bloomberg Intelligence associate analyst Morgan Barna.

That means EMQQ benefits from outperforming stocks elsewhere. Shares of MercadoLibre Inc., the Latin American online marketplace, have gained 42% this year to linger near a record. South African technology investor Naspers Ltd. has returned 8% this year.

Thirty of the 77 equities tracked by the fund -- or about 39% -- have advanced this year.

“EMQQ has bucked the outflows from emerging-market funds in the past two months, helped by outperformance in consumer segments,” Barna wrote in a research note this month. “E-commerce and digital-payments technology should fan consumer demand in other emerging and frontier markets.”

©2020 Bloomberg L.P.

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