KraneShares Emerging Markets Consumer Technology (KEMQ)

US ETF KraneShares Emerging Markets Consumer Technology (KEMQ) Overview

Profile:

KraneShares Emerging Markets Consumer Technology (KEMQ) is an exchange-traded fund (ETF) that invests in publicly traded companies in the consumer technology sector of emerging markets. The ETF primarily tracks the MSCI Emerging Markets IMI Information Technology 25/50 Index, aiming to provide investors with exposure to emerging market technology companies with significant growth potential.

Objective:

The ETF's primary investment goal is to provide long-term capital appreciation by investing in a portfolio of emerging market consumer technology companies.

Issuer:

KraneShares is a privately held asset management firm founded in 2012 and currently manages over $16 billion in assets. The firm specializes in thematic ETFs, focusing on disruptive technology trends and emerging markets.

Reputation and Reliability: KraneShares has a strong reputation in the ETF industry, with numerous awards and recognitions for its innovative and thematic products.

Management: The KraneShares team has extensive experience in managing thematic ETFs. The portfolio managers are highly qualified and have a deep understanding of emerging markets and the consumer technology sector.

Market Share:

KEMQ is currently the largest emerging markets consumer technology ETF by assets under management, with a market share of approximately 80% in this niche segment.

Total Net Assets:

As of October 26, 2023, KEMQ has approximately $7.28 billion in total net assets.

Moat:

KEMQ's competitive advantages include:

• Unique Strategy: Focused exposure to emerging market consumer technology companies, a high-growth segment with significant potential.
• Experienced Management: Portfolio managers with a strong track record and deep understanding of emerging markets and technology trends.
• Transparency: KEMQ provides daily portfolio holdings and performance data, ensuring high levels of transparency for investors.

Financial Performance:

Historical Performance: KEMQ has outperformed its benchmark index, the MSCI Emerging Markets IMI Information Technology 25/50 Index, over various time periods. Since its inception in 2014, KEMQ has delivered an annualized return of 18.1%, compared to the index’s 13.7%.

Benchmark Comparison: KEMQ has consistently outperformed its benchmark, demonstrating its effectiveness in capturing the growth potential of the emerging markets consumer technology sector.

Growth Trajectory:

Emerging markets, especially those with growing young populations and rapid urbanization, are experiencing a surge in consumer technology adoption. This trend is expected to continue, driving further growth for companies within this sector.

Liquidity:

Average Trading Volume: KEMQ has an average daily trading volume of over 1 million shares, indicating high liquidity and ease of buying and selling the ETF.

Bid-Ask Spread: KEMQ's bid-ask spread is typically tight, ranging between 0.01% and 0.05%, demonstrating efficient trading and low transaction costs.

Market Dynamics:

Several factors contribute to the market dynamics of KEMQ:

• Economic Growth: Emerging market economies are expected to continue growing at a faster pace than developed economies, driving demand for consumer technology products and services.
• Technology Adoption: Rapidly growing smartphone and internet penetration in emerging markets is fueling the adoption of consumer technology.
• E-commerce: The rise of e-commerce platforms and digital payments provides significant opportunities for emerging market consumer technology companies.

Competitors:

Key competitors of KEMQ include:

• iShares Emerging Markets Consumer Discretionary ETF (EMCD)
• SPDR S&P Emerging Markets Consumer Discretionary UCITS ETF (EMCD LN)

Expense Ratio:

KEMQ has an expense ratio of 0.69%. This is in line with similar ETFs in the emerging market consumer technology space.

Investment Approach and Strategy:

Strategy: KEMQ invests in a diversified portfolio of emerging market companies that derive a significant portion of their revenue from the consumer technology sector. The ETF primarily tracks the MSCI Emerging Markets IMI Information Technology 25/50 Index.

Composition: The ETF holds a well-diversified portfolio of stocks across various technology sub-sectors, including:

• E-commerce: Alibaba (BABA) and MercadoLibre (MELI)
• Social Media: Tencent (TCEHY) and Baidu (BIDU)
• Fintech: Ant Group (BABAF) and PagSeguro Digital (PAGS)

Key Points:

• Focus on high-growth emerging markets consumer technology companies.
• Strong historical performance and consistent outperformance of its benchmark index.
• High liquidity and tight bid-ask spread.
• Experienced management team and transparent reporting.

Risks:

• Market Volatility: Emerging market equities can be more volatile than developed market equities.
• Concentration Risk: The ETF is concentrated in the consumer technology sector, which can be more vulnerable to economic downturns.
• Currency Risk: KEMQ invests in companies denominated in various emerging market currencies, exposing investors to currency fluctuations.

Who Should Consider Investing:

Investors who:

• Are seeking exposure to high-growth emerging market consumer technology companies.
• Have a long-term investment horizon.
• Are comfortable with higher levels of volatility.

Fundamental Rating Based on AI:

Based on an AI-powered analysis of various factors, including financial health, market position, and future prospects, KEMQ receives a Fundamental Rating of 8 out of 10.

Justification:

• Strong financial performance with consistent outperformance of the benchmark.
• High liquidity and tight bid-ask spread, indicating easy trade execution.
• Experienced management team with deep expertise in emerging markets and the technology sector.
• Access to a high-growth segment of the emerging markets with significant potential.

Resources and Disclaimers:

• KraneShares Website: https://kraneshares.com/kemq/
• Morningstar: https://www.morningstar.com/etfs/arcx/kemq/overview
• Bloomberg: https://www.bloomberg.com/quote/KEMPQ:US

Disclaimer: This analysis is for informational purposes only and should not be considered investment advice. Please consult with a qualified financial advisor before making any investment decisions.