Global X’s latest bet targets strong online growth in emerging markets

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By Christiana Sciaudone – Global X’s latest thematic bet is on disruption and high growth markets.

Emerging Markets Internet and Ecommerce ETF (EWEB) launched Ali Baba ‘s (NYSE 🙂 Singles Day on November 11 and focuses on companies that make most of their income from the Internet and e-commerce in emerging markets. Alibaba, in fact, is one of the top 50 holdings in the fund, which leans heavily towards Asia and more specifically China.

It has to do with the rise of e-commerce in the country, as well as the increase in smartphone and internet penetration, demographics and the size of the Millennial population, said Chelsea Rodstrom, research analyst at Global. X ETFs. China’s policies are also helping to make it a global innovator. And then there is the potential boom in the market ahead, while in the United States internet penetration is 90%, in China it is closer to 53%.

“These economies are shifting from adopters of the latest technology to skipping steps, to jumping and acquiring the latest technology and to becoming innovators,” Rodstrom said in a telephone interview.

EWEB is Global X’s latest bet on thematic funds, as it responds to an ever-growing demand for exchange-traded funds. The ETF market has grown from around $ 4 trillion last year to nearly $ 5,000 billion today, and is expected to grow to between $ 30,000 and $ 50 trillion by 2030. ETFs offer lower costs, liquidity and tax efficiency than traditional funds. While ETFs often track indices, Global X has focused on themes, creating its own basket of companies in areas such as genomics and biotechnology, cybersecurity, and education. The fund joins the Global X Thematic Growth suite of 24 ETFs and more than $ 7 billion in assets under management.

EWEB tracks the Nasdaq CTA Emerging Markets Internet & E-commerce Net Total Return index, with Asia representing a number of stocks.

“The Asia-Pacific region and Southeast Asia are probably the fastest growing areas,” Rodstrom said. Many companies are actively growing globally, whether through mergers and acquisitions or partnerships, diversifying and mitigating potential domestic risks. And emerging markets can be a roller coaster ride for investors, with economies prone to government interference and political instability.

These companies nevertheless outperformed their American counterparts. Rodstrom points out that in 2018, 74% of global growth was attributable to emerging market economies, driven largely by a rapidly growing middle class of internet-connected consumers. Consumption in emerging markets is expected to represent 84% of the global total by 2023.

“Investors interested in emerging markets understand their reasons for having higher growth potential, but many investors are unlikely to recognize how much emerging markets contribute to global growth,” said Rodstrom. “It is a way to access higher growth.”

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