The legendary $1.3 billion emerging markets ecommerce ETF known by its ticker EMQQ is getting a sister fund.
The FMQQ The Next Frontier Internet & Ecommerce ETF (FMQQ) which launched on the NYSE on Tuesday, will be the exact same as EMQQ, but with one difference: it excludes China.
FMQQ invest in online shopping companies through emerging and frontier markets, much like EMQQ. It will even hold most of the same companies as EMQQ. But it will avoid the Chinese names like Alibaba, Pinduoduo, JD.com, etc. that have been smashed this year as China’s government reigns the sector in.
FMQQ will charge the same fee as EMQQ: 0.86%.
EMQQ is managed by Kevin Carter. Mr Carter uses white labellers in both the US and Europe to manage and distribute the fund. In the US, it is distributed by Exchange Traded Concepts. While in Europe it is distributed by HANetf.
Bernie’s commentary – Chinese tech is oversold
On the surface at least this looks like a response to China’s tech crackdown. Since China clamped down on the predatory behaviour of its tech giants, the share prices of Alibaba, JD.com, Tencent, Meituan et al have fallen in a big way. Alibaba, the biggest online shop, has seen its share price fall more than 50% this year.
The China sell-off has dented the performance of EMQQ, which is down from $80 in February to $49 as of yesterday close of trading. Which may make it seem like the launch of FMQQ is a response to this. However Kevin Carter in an interview with ETF.com denied this. And said that he was planning on launching FMQQ anyway. He added Chinese tech companies were now very cheap and that investors should buy the dip.
For my part, I think Carter is spot on about Chinese tech being oversold. While banning tech companies from their aggressive acquisitions (as China has) will slow their growth, I suspect their revenue will carry on growing in the double digits nonetheless. What’s more the market has sold off Chinese tech companies whose businesses appear marginally impacted by the crackdown at most. SMIC and Xiaomi (neither of which are in EMQQ) are two examples in my view.