EMQQ Global, the team behind the EMQQ Emerging Markets Internet and E-commerce UCITS ETF (EMQQ LN), a $170 million emerging markets fund focused on internet and e-commerce stocks, is preparing to launch a new ETF in Europe targeting companies leading the digitalization of India.
Kevin T. Carter, Founder and CIO of EMQQ Global.
The INQQ India Internet & Ecommerce ESG-S UCITS ETF (INQQ) is expected to list across major European exchanges in the coming weeks.
Similar to EMQQ, INQQ is being brought to market in partnership with London-based white-label ETF platform HANetf.
Both EMQQ and INQQ have US-listed sister ETFs with approximately $470 million AUM on aggregate.
Investment case
India, now the world’s most populous country, is increasingly recognized as the “new China” due to its substantial economic growth – the International Monetary Fund projects India’s economy to expand by 6% this year, positioning it as the fastest-growing major economy in 2023 and 2024.
India’s economic dynamism has also been reflected in tangible stock market returns. Over the past five years, the BSE SENSEX, a mainstream benchmark for the performance of Indian stocks, has yielded a 93% return, outperforming the S&P 500’s 58% over the same period.
India’s impressive growth trajectory can be attributed to several factors, first and foremost of which is the expansion of the country’s middle class which has grown by an astounding 400 million in the last 15 years. This demographic shift has created a new generation of consumers with significantly increased spending power, fuelling consumer demand across a range of sectors.
In tandem with this demographic shift, India’s digital infrastructure has witnessed a remarkable expansion. The widespread accessibility of 4G networks, covering over 98% of the population, has facilitated an influx of 7 million new smartphone users each month. The burgeoning internet economy in India offers an attractive proposition for investors looking to capitalize on this unique growth phase, making INQQ an enticing option for those seeking to diversify their portfolio with exposure to an emerging digital powerhouse.
Kevin Carter, Founder and Chief Investment Officer of EMQQ Global, commented: “We are thrilled to bring INQQ to UCITS investors with HANetf. While developed nations have experienced the luxury of the internet for decades, over a billion consumers in India are only just beginning to go online. This booming consumer momentum, coupled with the country’s strong dedication to scaling physical and digital infrastructure in the coming years, is creating a compelling growth opportunity. We believe that the India Internet investment story is one that cannot and should not be ignored. INQQ will allow investors to tap into the foundation of this growth being powered by the smartphone-enabled digital consumer.”
Hector McNeil, co-founder and co-CEO of HANetf, added: “We are delighted to be launching INQQ India Internet & E-commerce ESG-S UCITS ETF with EMQQ Global. India’s prominence in the global economy has become impossible to overlook. Optimism surrounding its economy is on the rise, with many eyeing India as a destination for “China plus one” diversification strategies, highlighting the nation’s growing significance in the global economy. But the real opportunity in India, we believe, is digital-enabled consumption. INQQ will provide a way for investors to capture this exciting segment of the Indian market. Many broader indices include state-owned enterprises which historically have been a drag on growth whereas e-commerce businesses tend to be entrepreneur-led.”
Methodology
The ETF will seek to tap into the rise of the Indian digital consumer by tracking the India Internet and E-commerce ESG Screened Index. The index selects its constituents from a universe of Indian stocks, including American Depository Receipts, with market capitalizations greater than $300m and average daily trading volumes of at least $1m.
Companies involved in controversial weapons, conventional weapons, tobacco, and thermal coal are removed from the selection pool.
The methodology screens for companies that derive at least half of their profits, revenues, or assets from internet and e-commerce activities. Qualifying activities encompass themes such as internet services, internet retail, internet broadcasting, internet media, online advertising, online travel, online gaming, search engines, and social networks.
Securities that meet these criteria are selected to form the index and weighted by float-adjusted market capitalization subject to an individual security cap of 8% and an aggregate cap of 50% for stocks representing 5% or more. The index is reconstituted and rebalanced on a semi-annual basis.