EEM Still China’s Most Liquid ETF, But EMQQ Clearly Outperforms
Emerging market ETFs are on my mind this weekend as I contemplate risk on assets that outperform US benchmark ETFs and can act as a form of high portfolio growth (also high portfolio beta in some instances) in a time when real yield is insatiable. Mainly, I want to focus on an emerging market ETF, EMQQ. It outperforms the most liquid China ETF, EEM, and focuses on the Chinese consumer and internet companies.
With daily, weekly, and monthly technicals flashing buy, this emerging market internet and e-commerce ETF holds exposure to well known Chinese equities like Tencent, Alibaba, and Baidu. However, exposure is also in lesser known non-Chinese companies such as Naspers, Netease, and Mercadolibre. 60 percent of the holdings are in China similar to EEM, but another 25 percent goes to South Africa, Russia, South Korea, Argentina, Brazil, India, Cyprus, Singapore, and Taiwan. Beta on EMQQ is 1.33 while P/E ratio rests at 33 percent and a turnover rate of 33 percent.
Comparatively, EEM’s beta is at 1.08 with a P/E ratio of only 12. Meanwhile, its turnover rate is only at .02 percent. Clearly, EEM is a bit of a less risky emerging market ETF which is a bit extraordinary to say considering how volatile emerging market equities can be, especially in China which EEM is increasing its exposure to this year from 60 percent to nearly 80 percent adding highly coveted Chinese A-shares.
While EEM and EMQQ lead the pack in emerging markets ETFs with exposure to China, the two are without a doubt fundamentally different investments in spite of their similar equity exposure in companies like Tencent, Baidu, and Alibaba. Your decision on which to invest in depends on your entry and exit points, risk appetite, and of course overall market expectations. To be clear, I’m not suggesting these are good ETFs to invest in at the moment.
My own beta appetite is quite low at these record highs. However, in the likely event of higher volatility, the aftermath of increased market tumult can provide many promising opportunities for investors. Reactions to this likelihood require some liquidity though so make sure you keep some powder dry.
With daily, weekly, and monthly technicals flashing buy, this emerging market internet and e-commerce ETF holds exposure to well known Chinese equities like Tencent, Alibaba, and Baidu. However, exposure is also in lesser known non-Chinese companies such as Naspers, Netease, and Mercadolibre. 60 percent of the holdings are in China similar to EEM, but another 25 percent goes to South Africa, Russia, South Korea, Argentina, Brazil, India, Cyprus, Singapore, and Taiwan. Beta on EMQQ is 1.33 while P/E ratio rests at 33 percent and a turnover rate of 33 percent.
Comparatively, EEM’s beta is at 1.08 with a P/E ratio of only 12. Meanwhile, its turnover rate is only at .02 percent. Clearly, EEM is a bit of a less risky emerging market ETF which is a bit extraordinary to say considering how volatile emerging market equities can be, especially in China which EEM is increasing its exposure to this year from 60 percent to nearly 80 percent adding highly coveted Chinese A-shares.
While EEM and EMQQ lead the pack in emerging markets ETFs with exposure to China, the two are without a doubt fundamentally different investments in spite of their similar equity exposure in companies like Tencent, Baidu, and Alibaba. Your decision on which to invest in depends on your entry and exit points, risk appetite, and of course overall market expectations. To be clear, I’m not suggesting these are good ETFs to invest in at the moment.
My own beta appetite is quite low at these record highs. However, in the likely event of higher volatility, the aftermath of increased market tumult can provide many promising opportunities for investors. Reactions to this likelihood require some liquidity though so make sure you keep some powder dry.