However, now these tech companies are facing a further two-pronged attack. First, there are reports that Chinese regulators are going to prevent companies from listing on overseas stock markets. Second, the US Securities and Exchange Commission is currently finalising a key piece of legislation. It will force Chinese firms to comply with audit requirements or face delisting from US stock exchanges.

Both of these moves will negatively impact their shares prices. On Friday as I wrote this, JD.com and Pinduoduo were down over 9% each. DiDi, a ride-hailing app was down over 15% on news that it plans to delist from the NYSE.

That said, I’m optimistic about the long-term prospects of internet and e-commerce companies in China and other emerging markets. Mobile internet use is growing, there’s a burgeoning middle class and in many developing countries, a young population.

Therefore, I’m once again considering if I should take advantage of this long-term trend by buying an ETF that’s been on my radar for several months.

The ETF

ETFs (exchange traded funds) track an index or sector and can be bought and sold like a share through most online brokers.

The fund I’m looking at is HANetf Emerging Markets Internet & Ecommerce UCITS ETF GBP (LSE: EMQQ), which tracks the EMQQ The Emerging Markets Internet & Ecommerce Index.

That means it tracks companies across a wide variety of industries including online shopping and software. A broad range of countries is also taken in along the way, such as Brazil, China, India and Turkey.

For selection, the firms must be publicly listed, derive their earnings from online activities in emerging markets and have a market cap of $300m+. Recognisable companies include Alibaba and Tencent.

This fund should provide me with exposure to the online world that’s growing fast in emerging markets. With a twice-yearly review of the index, I’ll also benefit from any new entrants to this sector.

Am I going to invest?

Over the last year, this ETF is down over 20%. Indeed, on Friday it was down over 5% alone. It’s this type of price action that appeals to me. The price of this ETF has fallen because the Chinese tech stocks generally have been hit hard. but I don’t think this can go on forever. If the long-term trend is as I expect, then this really could be a bargain buy for me. 

However, for my portfolio, I’m still hesitating.

Although some investors may disagree, I still question just how diversified this fund actually is. Though the fund is meant to be diversified in terms of countries, I continue to feel it’s far too weighted towards China for my liking. The top five Chinese holdings account for over 35% of the fund.

Presently, as there’s so much uncertainty about Chinese technology stocks and their regulation in both China and the US, I’m more comfortable watching and waiting from the sidelines.

That said, I’m bullish about the long-term prospects of internet and e-commerce companies in China and other emerging markets. There’s widespread and growing mobile internet adoption, an expanding middle class and in many emerging market countries, a young population.

As I think about how to take advantage of this long-term trend, I’m looking into an interesting exchange traded fund (ETF). And ETF is a fund that track an index or sector and can be bought and sold like shares through most online brokers.

The ETF

The fund I’m researching is HANetf ICAV EMQQ Emerging Markets Internet & Ecommerce UCITS ETF (LSE: EMQQ), which — as the name tells us — tracks the EMQQ Emerging Markets Internet & Ecommerce Index.

This tracks web firms across a wide variety of sectors including online retail and social networking. The index also covers a diverse range of countries such as Brazil, China, India and Turkey.

To be in the index, the companies must be publicly traded, derive their revenue from internet and e-commerce activities in emerging markets and have a market cap of at least $300m.

This fund should provide me with exposure to the growth of web-based activities in the developing world. A twice-yearly review of the index means I should also benefit from any new companies entering this space.

Despite the quite high ongoing charge for an ETF (at 0.86%), I still like this fund because of the diversity of the companies held. Although the holdings are market cap-weighted, they’re capped at 8%, meaning that if one or two of the companies suffer, the downside impact to the fund should be limited.

Diving into some of the largest holdings reveals some well-known names. The biggest holding is Alibaba, which has an impressive record of growth. Though there’s some debate about how successful its sales for China Singles Day 2021 were, they were definitely up from last year. It also has a cloud computing business, similar to Amazon’s, which is growing.

The second-ranked holding is Tencent, which has a diverse business including video-gaming, digital payments and social network services. It also owns assets outside of China including holdings in Snap.

Looking at fund performance, there are no surprises. It’s down around 7% on the year, reflecting the Chinese authorities’ crackdown on technology companies. However, over five years, the fund is up around 90%. Given the growth of e-commerce in emerging markets, this is the kind of healthy return I like to see.

Should I invest?

There’s a strong argument for adding it to my portfolio, but I’m not going to invest yet. Although this ETF is diversified across several countries, it’s too heavily weighted towards China for my liking.

Given the size of China’s economy and the market-cap-weighted nature of the index, the dominance of Chinese firms is unsurprising and as China’s economy grows, I think this dominance could even increase.

I prefer to see how China’s regulatory environment develops over the next few months before investing.