Online retail boom in emerging markets ex-China


Ohen many investors in the United States think of e-commerce and online retail in emerging markets, they usually think of China. This makes sense, as China is the world’s second largest economy and home to the largest population of internet users in the world.

However, investors should not overlook e-commerce/online retail opportunities in other developing economies. Although selecting securities for this purpose is difficult, the Next Frontier Internet and E-Commerce ETF (FMQQ) lighten that burden.

FMQQ, which tracks the FMQQ Index, is the emerging market online e-commerce and online retail exchange-traded fund that does not rely heavily on Chinese stocks. In fact, the fund has no direct exposure to China. Its geographic selection includes India, Brazil, Indonesia, Russia, South Korea, South Africa, Mexico, Argentina, Malaysia, Thailand, Vietnam, Philippines, Turkey , the Czech Republic, Poland, Colombia, Singapore, Cyprus and the United Arab Emirates. , depending on the issuer.

Some of these countries are home to fast-growing online retail markets. For example, online retail in India, Asia’s third-largest economy, jumped to nearly $61.5 billion last year, but the growth is far from over. Analysts expect that figure to swell north of $75 billion in 2022, and major Western retailers, such as Amazon (NASDAQ:AMZN) and Walmart (NYSE:WMT), are taking notice.

“The so-called phygital world is also growing rapidly in India, with Amazon working with existing physical retail networks to provide services such as in-store pickup. In March, he started working with 50,000 Kiranas, small family businesses that cater to local customers. Many of them managed to keep going when disruptions to supply chains caused by Covid lockdown restrictions pushed e-commerce operators to hit the buffers,” Storyteller reports.

Brazil, Latin America’s largest economy, is another market with immense long-term online retail potential, as well as being a hotbed of fintech developments in the region.

“And, despite its turbulent political situation, Brazil is also attracting the attention of retailers in the developed world. Fitch Solutions estimates that household spending in the country will increase by 4% in real terms next year. A hybrid online/physical form of takeaway food retail that has been popular in Brazil for some time is now being exported to Europe and Africa,” according to Raconteur.

Brazil and India are FMQQ’s second and third largest geographic exposures, respectively, together accounting for 26% of the ETF’s roster. South Korea is the fund’s largest country allocation with 27%.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Anne G. Cash