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EMQQ enjoys strong returns on back of frontier ecommerce investments


Kevin Carter’s Emerging Markets Internet & Ecommerce ETF (EMQQ) has recorded returns of 20.14 per cent to end June this year, and has enjoyed annual revenue growth of over 34.1 per cent for the past four years (2015-2018).

Carter has raised his game, having originally had enough confidence in his volatile sector to offer a ham sandwich to anyone who could find a sector that has grown faster than his. That offer is now at USD100,000 and made in his hundreds of presentations to potential investors, with a colleague urging him to raise it to a million, such is the continued confidence.

The sector is volatile to say the least. His USD400 million ETF has enjoyed a good year to date but it still sits 30 per cent below the highs of a year and a half ago. The 2018 trade war and escalating tariffs between the US and China hit it badly.

“One of the things for this ETF is that the money comes in waves,” Carter says. “2017 was a big wave that came through when most of our assets came in and a year when we did really well. The nature of our fund has been that is either really hot or really cold.”
June and December see the index rebalancing each year to include new names and the list this time includes the recently IPO’d Jumia, the biggest ecommerce company in Africa, as well as Pinduoduo, and the Berkshire Hathaway approved Brazilian fintech company, StoneCo
The new index now comprises 66 companies, with the African Jumia internet company perfectly demonstrating the volatility of the sector. It IPO’d on the NYSE and brings a whole new continent to the ETF, as the first pure Africa e-commerce business.
“It’s been a volatile stock in its short life,” Carter says. He had calls from reporters around the time of the IPO asking how can this company, which is losing money, do in an IPO?
His answer was to point out that it was no secret that the company was losing money, but Uber and Lyft were also losing money when they came to market so it’s not clear that is an issue.
The stock attracted a lot of excitement with investors seeing it as an opportunity to get in on the ground floor in a new continent and double and tripled its share price before falling back to below the IPO price. It’s still a good story, Carter says.
The Brazilian payment company, StoneCo, was also supported in its IPO by Berkshire Hathaway so has a good pedigree. Pinduoduo is a company that its CEO, a former Google executive, describes as Costco meets Disneyland. The company is battling with Alibaba for market share and enjoyed 171 per cent revenue growth in its most recent quarter, offering a mixture of social and gameification through its platform.
“I think that investors in the ETF who are buying now will do well over three, five or even 10 years as the fundamental growth of these companies is 30 per cent,” Carter says.
“I think investors will do well versus broad US equities and it will beat broad emerging market equities too,” he says. “It’s a great story and the numbers reflect the fundamental growth of the fastest growing sector in the world and one that may be the fastest growing sector in the world ever.”

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