Emerging Markets ETF & India Internet ETF Report | Apr 2024

Emerging Markets ETF & India Internet ETF Key Takeaways:

The leading positive contributors to the performance of the EMQQ Index in March were Meituan and Tencent, posting gains of 21.4% and 9.6%, respectively. The former benefitted from a strong quarterly earnings print, which saw revenues rise 23% while profits jumped. Meanwhile, Tencent got a boost after announcing plans to double its stock buyback program, which is discussed further below.

The two largest detractors for the month were China-based Pinduoduo and Latin America’s Mercadolibre, falling -6.7% and -5.2%, respectively. Pinduoduo declined despite an impressive set of quarterly results, in which revenues and net profits more than doubled from the same period last year. Mercadolibre, on the other hand, was down on light news. Management did, however, announce plans to invest billions in its core markets, including Mexico and Brazil, as the company continues to go from strength to strength in Latin America’s nascent e-commerce and fintech markets.

Source of all performance data: HANetf / Bloomberg. Data as of 31.03.2024. Please note that all performance figures are showing net data. Past performance is not indicative of future performance and when you invest in ETFs your capital is at risk.

Emerging Markets Tech News

India Heads to the Polls

Election season is quickly approaching in India. If the incumbent, Prime Minister Narendra Modi, secures a third electoral victory this year, the country’s economic momentum is poised to continue its upward trajectory. India’s strong economic performance and political stability under Modi have bolstered investor sentiment, with the IMF forecasting growth at 6.5% this year and next. Analysts are optimistic about India’s long-term growth prospects, citing the corporate sector’s ability to translate economic growth into earnings. Modi’s much-anticipated reelection is seen as conducive to political stability. Over the last decade, Modi’s government has facilitated manufacturing and infrastructure investment and, most importantly, has spurred the country’s digital transformation.

India’s Digital Public Infrastructure to Unleash $1 Trillion Digital Economy

A report by Nasscom and Arthur D Little titled “Digital Public Infrastructure of India – Accelerating India’s Digital Inclusion” predicts that Digital Public Infrastructures (DPIs) will play a crucial role in propelling India towards a $1 trillion digital economy by 2030, contributing to its goal of becoming an $8 trillion economy. Mature DPIs like Aadhaar (digital identity) and Unified Payments Interface (digital payments) have already seen widespread adoption, and the next seven to eight years offer opportunities for further scalability, even reaching remote population segments. These DPIs are expected to enhance citizens’ efficiency and promote social and financial inclusion significantly by 2030.

The report highlights India’s significant economic transformation driven by DPIs, which facilitate the development of essential government services and platforms, foster market innovations, and enable the creation of an inclusive ecosystem. According to Rajesh Singh, president of Arthur D Little India, mature DPIs have already contributed $31.8 billion, equivalent to 0.9% of India’s GDP, and this economic value is projected to increase to approximately 3%-4% of GDP by 2030, considering both direct and indirect impacts.

Nubank Ups Ambition as Profits Jump

Brazil-based Nubank, the world’s largest digital bank, aims to become the largest financial institution in Latin America in the coming years. CEO David Vélez expects the company to reach $1 billion in annual net profits this year, a milestone unprecedented for Western neobanks. Expansion in Mexico is a key part of Nubank’s strategy, as the CEO sees significant potential in a market with a high population and low banking penetration. Nubank plans to disrupt Mexico’s established banking oligopoly, much like it did in Brazil. The company also eyes entry into new Latin American markets and even the United States, leveraging the sizable Latino population. Despite being smaller than traditional banks, Nubank is already among the top five financial institutions in Latin America by customer base, with ambitions to claim the top spot in the $1 trillion market.

Mercadolibre Spurs Investment Boom in Latam

MercadoLibre, the leading e-commerce and payments platform in Latin America, is making a significant investment of $2.5 billion in Mexico this year, aiming to bolster its presence in the country. This investment will be allocated across various areas, including expanding warehouse space, enhancing logistics networks, increasing loans, salaries, and investments in marketing, distribution and technology. In addition to that, the company has earmarked another $4.6 billion in investments for Brazil. Together the two significant investments point to continued bullishness for the Latin American internet and tech sectors.

Chinese Tech Ramps Up Buybacks

Tencent Holdings, China’s largest internet company, plans to more than double its stock buyback program to at least $12.8 billion in 2024. Tencent remains optimistic about improving gaming and fintech revenues in quarters to come, driven by enhancements to popular titles. The company also highlighted the role of artificial intelligence in boosting advertising revenue. Tencent’s decision to bolster its buyback program and increase its annual dividend by 42% mirrors similar actions taken by other major Chinese tech firms such as Alibaba and JD.com.

Pinduoduo’s Growth Soars

Chinese e-commerce company Pinduoduo has announced a significant surge in quarterly revenues, attributing its success to the meteoric growth of its low-cost shopping platform, Temu, throughout 2023. The Nasdaq-listed company reported revenues of $12 billion for the quarter, marking a 123% increase from the previous year, surpassing analysts’ estimates. Meanwhile, the company’s overall net profits for Q4 2023 also surged by 146% year-on-year. Temu, which poses a threat to established players like Amazon and eBay with its competitive pricing, has launched an extensive internet advertising campaign to capture market share in the US and a series of other international markets.

Emerging Markets ETF Performance
As of 31.03.2024

 1M3M6MYTD12M3YSI
EMQQ Emerging Markets Internet & Ecommerce UCITS ETF2.79%1.49%6.63%1.49%-1.30%-50.43%1.42%
EMQQ Emerging Markets Internet & Ecommerce Index3.05%1.98%7.44%1.98%-0.08%-48.77%7.99%

India Internet ETF Performance
As of 31.03.2024

 1M3M6MYTD12M3YSI
INQQ India Internet Emerging Markets & Ecommerce ESG-S UCITS ETF1.33%3.80%N/A3.80%N/AN/A11.91%
INQQ The India Internet & Ecommerce ESG Screened Index1.65%4.86%16.30%4.86%52.82%N/A13.98%

Please note that all performance figures are showing net data. Source: Bloomberg / HANetf. Data as of 31/03/2024

Performance before inception is based on back tested data. Back testing is the process of evaluating an investment strategy by applying it to historical data to simulate what the performance of such strategy would have been. Back tested data does not represent actual performance and should not be interpreted as an indication of actual or future performance. Past performance for the index is in USD. Past performance is not an indicator for future results and should not be the sole factor of consideration when selecting a product. Investors should read the prospectus of the Issuer (“Prospectus”) before investing and should refer to the section of the Prospectus entitled ‘Risk Factors’ for further details of risks associated with an investment in this product. Please remember that when you invest in ETFs and ETCs your capital is at risk.