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This Is the Safest Bunker in Any Trade War

1 | By Michael A. Robinson

This was supposed to be a bad year for Chinese tech stocks.

A very bad year.

After all, President Donald Trump took office in January after months of criticizing China’s trade policies. And since then, he’s been heard screaming for tariffs.

So it’s no surprise that the know-nothings on Wall Street and in the establishment media continue to warn of a trade war with the world’s most populous nation. (After all, that’s where tariffs would put us.)

However, both the media and the Street both are missing a key fundamental driving China’s economy – internal growth, especially on the internet, untouched by trade.

It’s a sector that must be in your portfolio.

And I’ve dug up a way for you to get into the Chinese web sector – with very little risk to your portfolio.

So far in 2017, it’s demolished the S&P 500 by more than sixfold.

And there’s plenty more of that ahead…

Where Optimism Pays Off

This is not news to you folks.

Exactly two weeks after Inauguration Day, I told you not to give into pessimism about China. I said I didn’t believe we’d see a trade war – and I showed you a great way to play China’s high-growth e-commerce sector.

Now that most second-quarter earnings reports are behind us, I wanted us to take a look at just how well our China e-commerce play has done.

You might wonder why I was so bullish on China’s e-commerce stocks earlier this year when most other analysts saw trouble ahead.

That’s a fair question, given that I’m a Silicon Valley guy, not a China guy. Here in the Valley, I’ve served as a strategic advisor to a dozen tech startups and was an advisory board member of a venture capital firm. I talk to tech CEOs all the time – in fact, sometimes we go sailing together on San Francisco Bay.

And it’s those Silicon Valley sources that let me in on this modern Chinese secret.

Just about every tech exec I talk to emphasizes the importance of China. It’s now the world’s second-largest economy – and one with a massive shift to urban centers and a rising middle class who are spending a lot of their money while online.

Consider this…

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Last year, 43 million more Chinese citizens logged onto the web for the first time, according the China Network Information Center. As a result, some 731 million Chinese are now online. That makes China’s web population more than double the size of the one we’ve got here in the United States.

And it’s still has a lot of room of growth. Here at home, roughly 85% of us are online these days, but in China, they’re just a little over halfway there.

That means 700 million more Chinese are heading online over the next few years. Even if we cut that in half, to be conservative, that still means more than 1 billion Chinese people will soon be getting the news, viewing videos, using email, and, of course, shopping via the web.

The analysts at Forrester note that online sales, including those from mobile devices, stood at roughly $307 billion in 2014. By 2019, that figure will have more than tripled to $1 trillion.

And when it comes to making big money on this red-hot sector, I have an insider’s edge here as well…

Your Piece of a $1 Trillion Pie

See, Kevin Carter is one of those Silicon Valley executives I know – we have lunch together pretty frequently. Carter is the founder and chairman of the Emerging Markets Internet & Ecommerce ETF (NYSE Arca: EMQQ).

This exchange-traded fund is based pm the Emerging Markets Internet & Ecommerce Index. This is a group of companies that derive at least half of their revenue from emerging markets and frontier economies and have at least a $300 million market cap.

Make no mistake. The emerging and frontier markets this ETF targets are set for explosive – or better – growth.

Back in 2010, world consumption was split $12 trillion to $26 trillion in favor of developed economies. By 2025, the projection is a $30 trillion to $34 trillion split.

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Over that 15-year cycle, developed economies will grow by a respectable 25%. But emerging markets will roughly triple.

With this fund we also get some geographic diversity as well. It’s mostly focused on China, but EMQQ also holds stocks in Africa, Eastern Europe, India, and Latin America.

EMQQ’s top holdings include Chinese e-commerce stars like Alibaba Group Holding Ltd. (NYSE: BABA), Tencent Holdings Ltd. (OTC: TCEHY), and JD.com Inc. (Nasdaq ADR: JD). But it also owns a number of lesser-known e-commerce stocks that are focused on emerging growth sectors.

Take a look…

EMQQ’s Stars

Emerging Market Star No. 1 – Bitauto Holding Ltd. (NYSE ADR: BITA): This web company offers internet content and online marketing services to China’s auto industry. A report by industrial consultants McKinsey & Co. predicts that SUV sales will triple by 2020, although passenger cars will still make up most of the market. And China is expected to contribute 34% of overall growth in the sector over the next five years – and North America a mere 14%.

Emerging Market Star No. 2 – Ctrip.com International Ltd. (Nasdaq: CTRP): This is like getting the Chinese versions of Expedia Inc. (Nasdaq: EXPE), Priceline Group Inc. (Nasdaq: PCLN), and Orbitz Worldwide Inc. (NYSE: OWW) – all in one stock. As with most sectors in China, the air travel market is growing at stunning rates. China is already the globe’s second-largest air travel market and, according to the International Air Travel Association, will overtake the US market within the two decades.

Emerging Market Star No. 3 – MercadoLibre Inc. (Nasdaq: MELI): This is the dominant online shopping and payments portal in Latin America, a region with a population of roughly 620 million. You can see the region’s e-commerce growth in MercadoLibre’s results for the June quarter. During those three months, the Buenos Aires, Argentina-based company reported 41% growth in the number of items sold to 61.5 million, while total payment transactions increased by 63.3%. Overall sales rose 58% after accounting for currency changes.

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Emerging Market Star No. 4 – Naspers Ltd. (OTC ADR: NPSND): This South African company is EMQQ’s fourth-largest holding, but it’s hardly known in the United States. Naspers provides a wide range of e-commerce services and platforms from its base in Cape Town to more than 130 countries. It’s now the largest company in Africa – and the seventh-largest internet firm in the world. Naspers also has a stake in Flipkart Internet Pvt. Ltd., the “Amazon of India.”

Emerging Market Star No. 5 – Qihoo 360 Technology Co. Ltd. (NYSE: QIHU):This is another of my favorites in EMQQ. Qihoo is a homegrown Chinese cybersecurity company. And that’s a very big deal given the lack of trust between the United States and China regarding cybersecurity. The Americans think Chinese software and hardware have spyware, and the Chinese think the same of Americans’ products. This makes Qihoo a winner for 1.4 billion Chinese people – and all their devices.

As you can see, the fund take a very broad approach has cherry-picked some real winners. Not only that, but it’s also a strong performer.

Take a look…

From Emerging Markets to Emerging Destinations

Since the beginning of this year, EMQQ has gained 52.3%, compared with the S&P 500’s 9.1% advance. In fact, it’s gained more than 35% since I told you about it two weeks after Inauguration Day.

Launched in 2014, EMQQ opened today at $34.20. For that price, you get a lot of upside from a tech sector – the emerging markets one – that’s growing much faster than the mature market here at home.

When I first launched Strategic Tech Investor, I told you that “The Road to Wealth Is Paved by Tech.”

And sometimes that road takes you a long way from Silicon Valley.

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You definitely want to own this fund for a long time. I hope one day you’re able to use your gains to fund a luxury vacation to one of those emerging markets.

A walking safari in Tsavo, Kenya? An underwater adventure off Raja Ampat Archipelago, Indonesia? A biking trip through the Old World charms of Albania?

The choice is yours.

Cheers to that.

See you later this week.

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