Page 15 - DIY Investor Magazine - Issue 26

For example, in China, there is a holiday called ‘Singles
Day’ – November 11th. On Singles Day in 2020, Alibaba - a company often described as ‘The Amazon of China’ reported an astonishing $56 Billion in salesiii - dwarfing the previously referenced $11,000/second spent on Amazon during peak CoronaVirus.
With the pandemic driving consumer behaviour online at
an accelerated rate, demographics and regions that have remained slow or even resistant to adopting a more digitised lifestyle seem to have relented and started to convert. In Latin America, where online retail sales only account for 5% of total sales, is expected to surge to 25% in one decade according to a recent HSBC studyiv.
‘COVID-19 COULD DO TO LATIN AMERICA WHAT SARS DID TO CHINESE E-COMMERCE IN THE EARLY 2000S’
Rajiv Jain, one of the HSBC analysts even proclaimed, “Covid-19 could do to Latin America what SARS did to Chinese e-commerce in the early 2000s.” These projections highlight the potential that exists not just in the more mature ecommerce market of China, but the likes of Brazil, Chile, Mexico, Indonesia, India, Vietnam and many other geographies now incentivised to accelerate their mobile adoption rates.
The Latin American leader in Ecommerce is Argentinian-based Mercadolibre (MELI), which posted a return of over 45% for the month of Mayv.
With the virus continuing to spread in Brazil and elsewhere
in Central and South America, MercadoLibre, has disproportionately benefited over competitors due to its more robust supply chains and logistics management that’s been capable of meeting the tremendous surge of demand.
Mercadolibre also represents how the macro conditions
that continue to drive China’s digitisation, are also being felt throughout developing economies, but offering the possibility of even greater upside as they come off a much lower base and much earlier in their digitisation cycle.
In the Latin American region, only 34% of consumers under the age of 15 buy goods online, compared to the 74% in the UK and just over 60% in Chinavi. This adoption gap is closing fast however as the virus has created an extra incentive and catalysing growth.
After reporting to register 1.7 million new customers for the month alone, MELI COO, Stelleo Tolda proclaimed on his last earnings call that they are at a “point of no return” and “digitisation will stabilise at a much higher level”.
INVESTING IN THE EMERGING MARKET ECOMMERCE OPPORTUNITY
While investors can and should do their own research
on stocks that are involved in internet and ecommerce in emerging markets, there is an alternative in the form of an exchange traded fund (ETF).
An ETF is a basket of stocks that tracks the performance of
an index such as the EMQQ Emerging Markets Internet and Ecommerce Index. This index comprises leading internet and ecommerce companies that serve emerging markets such as search engines, online retailers, social networks, online gaming and e-payment systems.
ETFs trade on a stock exchange and can be bought in the same way as a share through a broker. It is an accessible way to buy into a theme without having to pick individual stocks. Of course, like shares, prices can go down as well as up and an investor’s capital is at risk.
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15 DIY Investor Magazine | Dec 2020