Emerging Markets ETF & India Internet ETF Report | June 2024

Emerging Markets ETF & India Internet ETF Key Takeaways:

The leading positive contributors to performance for the EMQQ Index in May were China-based Pinduoduo and Latin America’s Mercadolibre, posting gains of 19.7% and 18.3%, respectively. Both companies were buoyed by strong quarterly reports.

Pinduoduo saw sales surge 131% on the back of its popular international shopping app, Temu, while its net income more than tripled.

Meanwhile, Mercadolibre saw its revenue rise 36%, driven by strength in its ecommerce and fintech businesses in Brazil and Mexico. Net profit jumped 71% from a year earlier.

The two largest detractors for the month were Baidu and Netease, falling -10.7% and -8.5%, respectively.

Nonetheless, Baidu, China’s largest search engine, has guided for accelerated growth on the back of its new AI revenue streams, including its Chat-GPT competitor called Ernie, which has already garnered over 200 million users.

Meanwhile, Netease, China’s second-largest gaming company, is looking forward to a series of new title launches over the next several months.

Source of all performance data: HANetf / Bloomberg. Data as of 31.05.2024. 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’s Modi secures third term

Incumbent Prime Minister Narendra Modi is set for a record third term following India’s 2024 elections, making him only the second leader in the country’s history to achieve that feat. While he and his BJP Party did not secure an outright majority in the country’s parliament, he and his coalition partners have garnered enough seats to form a government. While the new coalition government will pose challenges, the reform-intensive agenda of the Modi administration will continue for at least another half-decade, helping to propel India’s economy and its internet sector forward.

India’s GDP surprises to the upside (again)

India’s GDP grew by 8.2% in the fiscal year ending in March 2024. The economy expanded by 7.8% in the final quarter, surpassing the government’s forecast of 5.9%, positioning India to be the world’s fastest-growing major economy this year. This growth aligns with India’s aspiration to achieve high-income developed nation status by 2047, with a need to sustain an annual growth rate of around 8%, as highlighted by the Managing Director of Operations for the World Bank in February.

IMF revises China’s growth upwards

The International Monetary Fund (IMF) recently raised its forecast for China’s economic growth in 2024 to 5%, up from the previous estimate of 4.6%, citing strong first-quarter performance and recent policy interventions that are aimed to help bolster the economy. Following an assessment visit to China, the IMF also revised its projections for 2025, expecting the economy to grow by 4.5% instead of the previously forecasted 4.1%. Combined, India and China are expected to help drive 60% of global growth this year.

Tencent posts fastest profit growth in three years

Tencent, China’s largest internet company, experienced a significant surge in quarterly profit, exceeding 60%, driven primarily by higher-margin businesses such as advertising and ecommerce. The company’s jump in net profits was the fastest since the March 2021 quarter. Tencent’s success can be attributed to its focus on advertising, mini-game platform fees, and ecommerce monetization. The company’s online advertising revenue soared by 26%, aided by advancements in advertising infrastructure, particularly in targeting through AI on its messaging platform, WeChat. Additionally, the resumption of gaming license approvals in China has further boosted Tencent’s performance.

Brazil’s Nubank hits 100 million customers as growth soars

Nubank, the largest digital bank in Latin America, recently surpassed 100 million customers, making it the first digital banking platform outside Asia to achieve this milestone. The bulk of its clientele is in Brazil, with 92 million clients, followed by over 7 million in Mexico and nearly 1 million in Colombia. Nu Holdings has intensified investments in Mexico and Colombia to bolster its market share in these countries. CEO and co-founder David Velez reflected on the company’s journey, noting that surpassing 100 million clients was a remarkable achievement considering their ambitious goal of reaching one million customers in five years back in 2013. The company also reported record financial results in 2023, with over $1 billion in net profit and revenues exceeding $8 billion. Nubank’s success reflects broader trends in the financial industry, where digital channels are increasingly favored by consumers.

Google invests $350 million in India’s largest ecommerce company

Google intends to invest in the Indian digital commerce giant Flipkart, becoming a minority investor in Flipkart’s latest funding round led by Walmart. The investment aims to bolster Flipkart’s business expansion and modernize its digital infrastructure, enhancing customer service nationwide. Flipkart, valued at $36 billion in the new investment, leads the e-commerce market in India, where it serves hundreds of millions of consumers in smaller cities and towns. The startup, which also owns the fashion e-commerce startup Myntra, commands about 48% of the Indian e-commerce market, according to Bernstein. Flipkart’s marketplace boasts over 500 million registered users, 1.4 million sellers, and 150 million products across 80 categories.

Emerging Markets ETF Performance
As of 31.05.2024

 1M3M6MYTD12M3YSI
EMQQ Emerging Markets Internet & Ecommerce UCITS ETF2.35%9.66%7.61%8.27%21.40%-45.52%8.19%
EMQQ Emerging Markets Internet & Ecommerce Index2.34%10.01%8.38%8.87%22.75%-43.74%15.29%

India Internet ETF Performance
As of 31.05.2024

 1M3M6MYTD12M3YSI
INQQ India Internet Emerging Markets & Ecommerce ESG-S UCITS ETF-3.61%0.11%8.66%2.55%N/AN/A10.56%
INQQ The India Internet & Ecommerce ESG Screened Index-4.21%0.49%10.68%3.66%33.92%2.91%12.68%

Please note that all performance figures are showing net data. Source: Bloomberg / HANetf. Data as of 31/05/2024

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.

EMQQ Details

EMQQ Emerging Markets Internet & Ecommerce UCITS ETF, is a UCITS compliant Exchange Traded Fund domiciled in Ireland.

The Fund tracks an index of leading Internet and Ecommerce companies serving Emerging Markets. It seeks to offer investors exposure to the growth of online consumption in the developing world. EMQQ holdings operate in diverse markets such as India, China, Brazil, Turkey, Nigeria and Indonesia, to name a few. To be included, the companies must derive their profits from Internet or Ecommerce activities; constituents are broad and diverse including search engines, online retail, social networking, online video, e-payments, cloud computing, online gaming, travel and numerous others.

Visit the EMQQ Fund Page for more information.

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