In the emerging markets equity complex, China and Russia continue hogging the spotlight for all the wrong reasons, but that doesn’t mean the entire asset class is a wash.
Perhaps to the surprise of many investors, there are still some worthwhile growth names to consider in developing economies, and the Emerging Markets Internet & Ecommerce ETF (EMQQ ) and the Next Frontier Internet & Ecommerce ETF (FMQQ) are among the exchange traded funds providing exposure to those names.
Take the case of Grab Holdings (NASDAQ:GRAB), a ride-hailing, food delivery, and fintech company. The Malaysia-based company does business in fast-growing economies in Southeast Asia, including Cambodia, Indonesia, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam.
“Southeast Asia is home to over 660 million people, and this region is one of the fastest-growing economic regions in the world. The total GDP for the area is expected to grow at a compound annual growth rate (CAGR) of 7.4% until 2025, comparable to China’s CAGR of 7.1% and much higher than the United States’ CAGR of 4.6%. Grab management estimates its total addressable market for the app will be over $180 billion by 2025,” according to the issuer of EMQQ and FMQQ.
As of March 9, Grab accounts for 1.19% of EMQQ’s roster. The stock commands a weight of 2.57% in FMQQ. Those percentages could increase over time because Grab is on a torrid pace of growth.
“Grab is also seeing its active users engage more with the platform. In the third quarter, Grab’s gross merchandise per user increased 43% year over year to $183, according to the Grab third-quarter report, 11/11/21. If the company wants to be a super app; that its users engage with constantly, it must see high engagement, so this is a great sign,” adds EMQQ’s issuer.
Adding to the allure of EMQQ and FMQQ in the current environment is that both ETFs recently meaningfully reduced exposure to Russian stocks. In the case of FMQQ, that fund has no direct exposure to Chinese stocks.
Getting back to Grab, investors shouldn’t overlook the company’s fintech potency, which includes digital wallets, insurance and investments.
“More than 6 in 10 Southeast Asians are unbanked or underbanked today. Grab Financial Group aims to change that by empowering everyone with simple, transparent, and flexible financial products. Grab Financial Group (GFG) offers a range of payment, lending, insurance and investment products for users. They aim to help individuals unlock better lives by making financial services simple and more affordable,” concludes EMQQ’s issuer.
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