It’s the time of year when everyone makes market predictions for the upcoming year. Among the many investors are currently hearing, one of the most common is a bullish outlook for emerging markets stocks in 2021. What Happened : The MSCI Emerging Markets Index is higher by 4.45% over the past month and will likely finish 2020 with a double-digit gain, but investors can go beyond the prosaic in search of bigger upside in 2021.
The newly minted Global X Emerging Markets Internet & E-commerce ETF(NASDAQ:EWEB) can provide the excitement of the emerging markets some investors will be looking for next year. Just over a month, EWEB tracks the Nasdaq CTA Emerging Markets Internet & E-commerce Net Total Return Index and taps into one of the more alluring themes in the developing world: e-commerce/online retail.
Why It’s Important: As has been widely documented, the COVID-19 pandemic is packing years worth of growth for e-commerce into a matter of months, a trend applicable in international markets as well as here in the U.S.
“Notably, the dramatic enrichment of their internet business ecosystem and its impact on the future of these countries is especially compelling,” according to Consumer Technology Association (CTA) research. “Specifically, two trends lie at the heart of this deepening digital landscape in developing economies: the role of e-commerce companies as incubators for technology adoption and the COVID-19 pandemic as an accelerator for internet business evolution.”
EWEB seizes on the evolution of companies such as Alibaba (NYSE: BABA) and JD.com (NASDAQ: JD) from pure e-commerce firms to broader, more vertically integrated enterprises. The rookie ETF also provides exposure to companies that are in the early innings of transitioning to that model.
“A newer Chinese e-commerce company, Pinduoduo, is in the early stages of this model,” notes CTA. “By staking its future on addressing the rural e-commerce gap in China with the launch of a five-year, $7.1 billion campaign to reach these underserved consumers, the company is diversifying its business model. As a result, the company has now augmented its offerings beyond traditional e-commerce to AI-driven and demand-based delivery solutions, as well as a livestreaming service.”
What’s Next: EWEB is just over a month old so it’s too early to judge the fund on performance or size. That leaves potential, which the fund undoubtedly has.
“The potential of emerging markets rests not only in their investment potential, but the promise of groundbreaking technological innovation that can reverberate globally. Ultimately, the QNETEM index (EWEB’s benchmark) offers a platform to showcase the companies behind these advancements to a greater audience,” according to CTA.