Investment Ideas: Data centres pricing power, Reviewing Watch List performance, and a super-focused Indian tech ETF
Plus, a new Index Linked gilts fund and reviewing the Next 10 emerging/frontier markets model portfolio of ETFs
- HANetf is about to launch a new India-specific tech ETF with a strong e-commerce and fintech twist
- CG is launching an index-linked gilt fund
- Equinix reports strong pricing power in the data centre market as AI takes off
- Cameco results underpin nuclear renaissance
- Brazil ETFs might be cheap relative to oil prices
- Heavy director buying at Cordiant Digital Infrastructure
- Reviewing the 17 stocks in the Watch List
A new super-focused Indian Tech ETF is on its way
London-based HANetf is imminently launching a really very interesting emerging markets ETF, giving investors direct exposure to Indian tech firms The new ETF is a partnership with US firm EMQQ Global which already runs a general EM tech ETF with the ticker EMQQ on the HANetf platform. The new ETF - India Internet & Ecommerce UCITS ETF (INQQ)- is an exclusively Indian-based consumer tech tracker fund. The underlying index has a number of screens:
- Indian companies that must derive more than 50% of revenue from the internet and or e-commerce
- Minimum market cap $300m
- Liquidity screen $1m daily average volume
- Capped at 8%
You can find out more about the methodology behind the fund and the index HERE.
The strategy is already in operation in the US market - you can find the US website here: https://inqqetf.com/. This new UK-listed fund is a European UCITs version of the existing US tracker.
There are two obvious points to make here. The first is that this is likely to be a risky investment with huge potential upside opportunity but also massive downside risk. It’s a focused, concentrated portfolio of around 24 stocks, mostly sexy Indian tech businesses, many of which boast ludicrous valuations. The first table below shows the indicative holdings in the fund:
India’s tech ecosystem is subtly different from China's and there is a huge bias towards Fintech and e-commerce. Looking again at the indicative holdings, fintech comprises around 30% of the holdings, e-commerce 15%, and food delivery 12.5%. More B2B-based sectors such as comms software and Saas comprise 11 and 9% of the indicative holdings. The performance of the US version of this fund - which is also relatively new – has been impressive so far. Year to date the NQQ index is up 19.4% versus a gain of 5.5% for the benchmark Nifty Fifty index.
The other obvious thing to say about the new fund is that the opportunity set is, of course, huge. With 7 million new smartphone users a month and a surge in the Indian Internet IPO pipeline, which has grown from 3 to 25 since 2020, India is in the midst of a digital revolution. The graphic below from EMQQ tells the story that most investors probably know by now. India is only at the beginning of an astonishing digital transformation with the BJP government keen tech pioneers.
I wouldn’t dream of puncturing that long-term narrative – India is quite clearly the place to be for a digital transformation in a huge market boasting lots of smart young workers. But I would finish with one last chart – from a recent Daily Shot note, which shows that the benchmark Sensex index is down sharply in recent weeks off the back of rising oil prices (and concerns about sky-high Indian equity valuations).
Note 1: Index Linked bonds and a new fund from CG
I’ve long tried to wrap my head around investing in index-linked government bonds. It’s a complicated niche with lots of moving parts and to date, I’ve been reluctant to dip my toe in the water. But if the idea of robust inflation protection appeals to you, I’d note that CG Asset Management (CGAM) has announced that it intends to launch an Irish-domiciled UCITs fund called the CG Portfolio Plc - UK Index-linked Bond Fund.
CGAM – set up in 2001 - has a long pedigree of investing in index-linked bonds with its first purchases of UK Linkers through the Capital Gearing Trust in 1992 (over 20 years ago).
CGAM manages £2.4bn in index-linked bonds across eight jurisdictions, including £500m in UK index-linked. In simple terms, if anyone is going to pick the right index-linked bonds, my money would be on CG. It’s also worth noting that this is their first new launch in seven years, and reflects their “belief that index-linked bonds are amongst the most attractively priced assets globally.” The fund is due to launch on 15 November
More at CG Asset Management
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