EMQQ’s Love For Alibaba Pays Off

Alibaba billionaire Jack Ma is spreading the wealth.

Kevin Carter’s EMQQ ETF is beating the market because of it. The fund is up 37.7% so far this year, beating its closest rival, the KraneShares China Internet (Unfortunately, we could not get stock quote KWEB this time.) fund. It’s also beating Alibaba (Unfortunately, we could not get stock quote BABA this time.) itself, which is up 36.6%.

“We are overweight Alibaba versus the index,” says Carter. The MSCI Emerging Markets Index has Alibaba weighted at 2.9%.

Alibaba will release its earnings on May 18.

Carter has been singing Alibaba’s praise for quite some time now. His fund was created to pick up from companies like Alibaba, and those that orbit around it – either by selling to the company, or other emerging market internet-based leaders – or because Alibaba is an investor. This holds true for other heavyweights in the emerging market internet and e-commerce space, too. The idea is to invest not only in the e-commerce leaders, but also in the companies that those leaders are invested in, and in companies that provide services to those firms.

Alibaba’s good year is helping EMQQ this year. The ETF is up over 42% in the last 12 months, just trailing behind the Chinese internet juggernaut.

About 80% of EMQQ’s holdings are not in one of the biggest emerging market ETFs out there, the Vanguard Emerging Markets Index (Unfortunately, we could not get stock quote VWO this time.), which is benchmarked to the FTSE. Most emerging market e-commerce companies trade on Nasdaq or the NYSE.

“FTSE doesn’t count them either in their index construction process,” Carter says. VWO is up around 22% over the last 12 months. “They don’t have any Alibaba.”

The iShares MSCI Emerging Markets (Unfortunately, we could not get stock quote EEM this time.), which obviously tracks the MSCI EM, is finally seeing the light. They recently changed methodology to include U.S. listed EM companies. BABA is approximately 2.9% in EEM, so EMQQ is also overweight vs EEM.

“There are lots of companies that benefit from Alibaba, but are not necessarily in EMQQ’s underlying index,” he says. Turning to other names in EMQQ, Carter says investors should take a look at 58.com (Unfortunately, we could not get stock quote WUBA this time.). “It’s the Craigslist of China,” he says. That stock is up 56% year to date.

EMQQ Under the Hood

Top 10 holdings*:
NASPERS (Unfortunately, we could not get stock quote NPSNY this time.)7.32%
CTRIP.COM (Unfortunately, we could not get stock quote CTRP this time.)5.59%
BAIDU (Unfortunately, we could not get stock quote BIDU this time.)5.50%
NETEASE (Unfortunately, we could not get stock quote NTES this time.)5.25%
YANDEX (Unfortunately, we could not get stock quote YNDX this time.)5.22%
JD.COM (Unfortunately, we could not get stock quote JD this time.)5.15%

*As of May 8, 2017. Some of these stocks are not listed in the U.S. Only U.S. listed shares have their accompanying ticker symbols.