Shares of Alibaba hitting a new yearly high yesterday.
Baba is up over 120% this year, showcasing the potential of international internet and e-commerce companies.
While the high flying tech sector has brought US markets to new records, firms are looking for potential in global markets, and recently, Nvidia CEO Jenson Huang saying China is right on America's heels when it comes to the AI race.
Joining me to weigh in.
On this Friday morning is Kevin Carter, founder and CIO of EMQQ Global.
Kevin, good morning.
Thank you so much for joining me.
Thanks for having me.
Well, 2025 has been quite the year and when we compare the performance of US equities to international markets, give us your take on what we're seeing in emerging markets.
Sure.
Well, what we're seeing in the emerging markets is basically the same thing we've seen here over the last 20 years, which is 6.5 billion new consumers getting their first ever computer, a smartphone, getting the internet for the first time and doing everything on their phones the same way we do.
It's the Fang stocks, if you will, of China, India, Brazil.
This is really where the next 10 and 20 years of tech growth is going to be.
Yeah, and here we are in the final quarter of 2025.
We've continued to hear the story of US exceptionalism versus outperformance of the international markets.
And when we take a look back and look at the global indexes, for the most part we are seeing double digit percentage gains for some of the major indexes.
But when it comes to the construction of emerging market indexes, what are the differences here and what are the risks?
Well, the biggest problem with the traditional emerging market indexes is the inclusion of state-owned enterprises, government owned banks and oil companies, which are Uh, inefficient, usually corrupt, and most importantly, they're not really trying to grow their earnings and you know if you're an investor in a company, the way the value goes up is when the earnings go up.
And so there's a structural defect, I think, in the traditional emerging markets, ETFs and indexes.
And the other problem is most of the internet companies, the fastest growing. best governed companies in emerging markets like Mercado Libre in Latin America, Sea Limited in Southeast Asia.
These are the largest companies in those regions.
They're the best performing companies and they're not even included in the index.
A lot of times because they actually trade here on the New York Stock Exchange or the Nasdaq and not in their home country.
Yeah, and here we are at the New York Stock.
Exchange for the publicly traded companies.
We do expect quarterly reports as well as guidance moving forward, but I'm glad you brought up state owned enterprises as well as earnings because we can't necessarily always rely on that data.
So when we're talking about the story, the foundational value play in EM, what is it right now?
Well, I think a lot of it in the rally this year has to do with just cheap.
I mean, if you look at the valuation, especially of the Chinese internet companies coming into this year, they were selling at single digit PEs.
They had been piling up cash, buying back stock, which helped the earnings growth.
And so I think that the move we've seen this year is just a relative valuation.
Adjustment because again we have so much market cap we've placed on AI when Deepse showed up, the world's investors sort of put their flashlight back onto the Chinese internet companies.
They saw that they have AI and that they're very cheap.
And from policy to technology, when we're looking at emerging markets, obviously it spans many nations, but what is the play and what do you need to focus on?
Well, I think you want to focus on the internet companies.
I mean, again, this isn't really a big leap of faith.
I mean we've seen how the computer and then the smartphone version of the computer changed our lives.
The Fang stocks took over our lives and our stock market first on PCs, then on smartphones, and it's still going.
The AI boost.
The same thing is happening in emerging markets.
It happened in China first.
I mean, the reality is.
That while China is an emerging market in a traditional sense, when it comes to the smartphone and e-commerce, China is the most developed country in the world, but Going forward the next 10 years, the next 20 years, the real growth, the fastest growth is going to be in places like India in particular, where you have essentially a larger population now than China.
But it's like China 20 years ago except 20 years ago nobody had a smartphone.
Now today in India, for example, you can get a new smartphone for $12.
And what are we talking about here when you're focusing on India from growth to consumption to the population?
What's really happening?
Well, everything's happening.
You've got the world's largest population.
It sets a record every day as the biggest population ever.
You have the best demographics.
You have the fastest GDP growth, and that's driving a massive wave of consumption.
But what's happening in India is it's hitting this growth curve at a time when when smartphones are becoming ubiquitous and very affordable.
And Kevin, last but not least, I want to round out this conversation with a look at tariffs.
Obviously there's a lot of uncertainty moving forward into the end of the year as well as the new year, but how do you think tariffs will affect these markets?
Well, I don't think we know yet.
The reality is the tariffs are still largely up in the air, especially with relates to China, which is the most important of the emerging.
Market.
So I don't think we really know.
I do think one thing that is most certain to continue is a shift to move production out of China in favor of places like India, and I think that's going to continue no matter what happens with the tariffs.
Well, Kevin, we will have to leave it there, but thank you so much for joining me here at the New York Stock Exchange and thank you so much for your insight.
