Amplify ETFs has introduced an ETF providing passive exposure to financial technology companies listed in emerging and frontier markets.
The fund provides equally weighted exposure to fintech companies listed in emerging and frontier markets.
The Amplify Emerging Markets FinTech ETF (EMFQ US) is available to trade on NYSE Arca and comes with an expense ratio of 0.69%.
The ETF has been created by repurposing one of Amplify’s less popular funds – the Amplify International Online Retail ETF (XBUY US).
According to Amplify, the new emerging markets fintech strategy offers a play on one of the world’s biggest structural growth stories – the rise of the emerging markets consumer.
The firm notes that emerging and frontier markets account for approximately 86% of the world’s population yet only 37% of global goods and services. Fintech is set to play a major role in unleashing this potential, facilitating the transition to consumer-oriented-growth economies.
The emerging markets fintech theme is supported by several factors including demographics (emerging markets are home to a young and increasingly tech-savvy population), increasing smartphone penetration (more people in emerging markets own a smartphone than a bank account), the rollout of robust digital infrastructure, and an acceleration towards contactless payments due to the Covid-19 pandemic.
Christian Magoon, CEO of Amplify ETFs, said: “The recent growth in fintech applications is leading to greater investor demand for exposure to financial technology solutions and applications in emerging markets. We believe these markets can nurture these fast-growing fintech solutions as we transition from a cash-based to a digital world.”
Methodology
The fund is linked to the EQM Emerging Markets FinTech Index which selects its constituents from a universe of emerging and frontier market stocks with market capitalizations above $100 million and average daily trading volumes greater than $1m. China-headquartered companies are only eligible through international listings.
The index selects all companies deriving at least 50% of their revenue from technology-enabled applications disrupting traditional financial service and banking business models. The methodology encompasses firms developing and providing mobile applications, online platforms, and enterprise software within the following business segments: payments, banking, lending & credit, insurance, investments & trading, and digital assets.
Constituents are equally weighted while capping the weight of any single country at 25%. The index is reconstituted and rebalanced quarterly.
As of 9 February, China had reached the cap of 25% while the next-largest country exposures were Brazil (14%), Hong Kong (8%), and South Korea (8%). The index’s sector allocation was dominated by information technology and financials stocks at 42% and 39%, respectively, with smaller weights in consumer discretionary (12%) and communication services (5%).
The index had 39 constituents, leading to robust diversification at the stock-specific level.