Lead-Lag Live
Welcome to the Lead-Lag Live podcast, where we bring you live unscripted conversations with thought leaders in the world of finance, economics, and investing. Hosted by Melanie Schaffer each episode dives deep into the minds of industry experts to discuss current market trends, investment strategies, and the global economic landscape.
In this exciting series, you'll have the rare opportunity to join Melanie Schaffer as she connects with prominent thought leaders for captivating discussions in real-time. The Lead-Lag Live podcast aims to provide valuable insights, analysis, and actionable advice for investors and financial professionals alike.
As a dedicated listener, you can expect to hear from renowned financial experts, best-selling authors, and market strategists as they share their wealth of knowledge and experience. With a focus on topical issues and their potential impact on financial markets, these live unscripted conversations will ensure that you stay informed and ahead of the curve.
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Lead-Lag Live
Fantasy vs Fundamentals: Emerging Markets, Global Tech, & the Return of EM Leadership
In this episode of Lead Lag Live, I sit down with Brendan Ahern, Chief Investment Officer at KraneShares, to break down the renewed momentum behind emerging markets and the forces driving performance across global tech and e commerce.
From valuation gaps and dollar depreciation to sector leadership shifts, Ahern shares how EM growth factors and specifically the KEMQ ETF are positioned to benefit from a structural rebalancing away from overstretched US valuations.
In this episode:
– Why emerging markets are regaining leadership after a decade of underperformance
– How tech and e commerce have reshaped the EM index composition
– The valuation divergence between US tech and EM tech
– Why ADR volatility distorts fundamentals and why local shares matter
– How investors should size EM exposure and position KEMQ in a portfolio
Lead Lag Live brings you inside conversations with the financial thinkers who shape markets. Subscribe for interviews that go deeper than the noise.
#LeadLagLive #EmergingMarkets #KraneShares #GlobalTech #KEMQ
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That's where people have gotten themselves in trouble is you get a kind of gr good news like we're seeing with some of their earnings, you get this proverbial green light, and then you get a pullback, but but you made it such a big position that you're almost forced out of that position. That's why I talk about, you know, only own as much as you're able to be able to buy on a dip. And I think that's a really a key element in success and investing, that not just around emerging markets, but just in general.
SPEAKER_00:I'm your host, Melanie Schaefer. Welcome to Lead Leg Live. Now, emerging markets are staging a real comeback this year, led by strength in technology and e-commerce. After lagging U.S. stocks for much of the past decade, markets like China, Brazil, and even India are now showing renewed momentum, supported by better earnings, easing inflation, and a shift in global capital flows. According to Bloomberg, the MSCI Emerging Markets Index is on track for one of its strongest years since 2017, thanks in a large part to a rebound in consumer tech and digital retail sectors. My guest today is Brendan Ahern, Chief Investment Officer at Crane Shares and one of the leading experts on China and emerging markets investing. Today we're talking about the Crane Shares Emerging Markets Consumer Technology ETF, ticker, KEMQ, and what's driving opportunity in this space. Brandon, welcome back.
SPEAKER_01:Thank you for the opportunity, Melanie.
SPEAKER_00:So let's start with the big picture. International and emerging market equities are finally showing signs of leadership again. What do you see as the main drivers behind this rally and what makes you confident it can continue into 2026?
SPEAKER_01:I think there's a whole host of issues. You know, one of them is just the incredible outperformance of U.S. equities over the last really 16 years since the GFC low. We've seen a vast outperformance of U.S. equities versus non-U.S. equities, including emerging markets. But I think part of what's driving this rebalancing is very high valuations in the U.S., as well as currency deappreciation of the dollar and some of the concerns around just some of the political dysfunction, the level of debt of the U.S. government today. So I think we're seeing a little bit of a rebalancing effect. And a lot of that, an element of that money is going to seek out growth opportunities in emerging markets, which is really what KEMQ is built for. It's really this growth factor for emerging markets.
SPEAKER_00:Yeah. And so, Brendan, you've been highlighting global tech and e-commerce as standout sectors within emerging markets for a while. Is it more of a short-term rebound? Or are we looking at structured shift where growth is coming back globally and for a while?
SPEAKER_01:Well, I think one is part of what's been made non-US equity such a poor asset class is really the composition of the indices. That if we looked at something like MSCI emerging markets, uh 50% of the benchmark was in financials and energy 10 years ago. And if you include industrials, materials, and real estate, it was really a value factor during a period where uh the market and investors favored growth equities and technology within MSCI emerging markets was only 10% of the index. So I think part of what's driving this is that investors recognize that there are global leaders, uh, companies not just in China, but in South Korea, in Taiwan, in South America, that are really geared. These are really tech companies. And those companies are actually performing really well. And if you remove some of these value sectors, uh, banks, financials, insurance, energy, if you remove those companies from the definition of emerging markets, lo and behold, you can get some really strong returns, as we've seen in KEMQ. Really one of the top performers, if not the top performing across both active and passive EM strategies.
SPEAKER_00:Yeah, and I want to just pivot now and talk a little bit about politics. I mean, today uh Epstein and the new uh documents that have come out are dominating the headlines, but in general, geopolitical tensions and trade headlines still dominate much of the conversation, usually. Yet we've seen companies like Alibaba and PDD holdays outperform the S ⁇ P 500 despite those risks. Do you think the larger geop geopolitical concerns are still overly priced in to uh these markets?
SPEAKER_01:Yeah, I think I think that's an issue if you're out buying the US ADRs of a lot of these companies, particularly on the China side. But but in general, yeah, these companies, in when they're listed solely here in the US, they're gonna have a high degree of volatility. They're not gonna trade on fundamentals, they're gonna trade on tweets and the news feed. And that's why we've really migrated our strategies to holding the local shares when we can, when that local shares has ample liquidity, just because you just see on a daily basis where this kind of media narrative is so negative. Um, and I think it really weighs on the ADRs. And that's why in the case of, say, Alibaba, we don't we don't hold the ADR, we hold 9988 and uh in Hong Kong because investors in in Asia, when they get that same news, they they recognize with what it is. It's just clickbait. And and so you know, if you hold BABA US, you know, I wish you good luck because it's gonna be absolutely absurdly volatile because of this media narrative makes it really volatile. And yeah, I think that's part of the benefit of an ETF is we're we're gonna do something for you that's gonna be really hard to do, which is hold a Hong Kong, South Korea, Taiwanese stock locally.
SPEAKER_00:Can you talk a little bit about the earnings that you've seen uh starting to come out and and particularly some of the companies that are lagging what we've seen in the reports?
SPEAKER_01:Yeah, I think I think we're kind of coming into Q3 earnings season. And you know, some of the China uh companies, uh some of the China tech leaders, um, very strong results from Tencent, JD, Billy Billy. Uh, you know, Tencent, one of the largest companies in emerging markets, was able to grow revenue 15% year over year. They did almost 27 billion of revenue for the quarter. So I think Tencent is kind of a good example of a really a tech leader just listed outside of the US. The other difference is it's cheap, that that it's not at all-time highs. You know, the stock is actually below its all-time high back in 2021. So I think that's part of what's leading a little bit of this rebalancing effect is this valuation disparity between US tech and if it's China tech or EM tech. Um, these stocks have upside potential. And I think that's that's a little bit of a harder argument for some of the US names based on really the very high valuations.
SPEAKER_00:And when if you're talking to advisors or to uh investors about when a good time is to enter, is now a good time, or do you see a pullback coming uh following the earnings reports?
SPEAKER_01:Yeah, I mean, in general, I think market timing is is is very difficult. Um, you know, in my own personal account, I've probably proven I've not done it very well. Um I think ultimately, you know, you know, emerging market growth investing um is an asset allocation decision. And and I think that's a you know, it's a permanent part of an asset allocation. And you know, it's got to be volatility adjusted. So, you know, certainly within you know a you know, a broad asset allocation, EM might be between five and 10% in a portfolio based on one's uh risk profile. So, so so within that, within that, you know, we're probably representing half of that position. So I think I think the key is you don't want to own so much that if there's a pullback, you're not willing to add to the position. I think that's where people have gotten themselves in trouble, is you get a kind of a good news, like we're seeing with some of their earnings, you get this proverbial green light, and then you get a pullback, but but you made it such a big position that you're almost forced out of that position. That's why I talk about, you know, only own as much as you're able to be able to buy on a dip. And I think that's a really a key element to in you know success in investing, not just around emerging markets, but just in general.
SPEAKER_00:Yeah, so I that's what I want to get into more about um investors who are looking at their portfolio as a whole. How much, or I think you said about five percentage of KEMQ, but in terms of emerging markets, how should investors be looking to diversify beyond just US exposure? And can you talk a little bit of a little bit more about some of your other ETFs?
SPEAKER_01:Yeah, I mean, listen, broad, broadly speaking, you know, the US equities are two-thirds of the all-country world index. So, so so you have, you know, you're always going to have a healthy exposure to U.S. equities. And certainly a lot of US multinationals have a lot of foreign revenue. I think, I think what we're seeing is what's driving a little bit of the rebalancing effect is just doing the simple valuation comparison, right? And you know, it's it's it's almost become a joke where you know some of these individual US tech names you could buy every company in emerging markets. I mean, that's that, you know, they don't necessarily ring a bell at the top, but I think there are some signals, some potential signposts, or at least a little bit of a yellow caution. So again, you know, you know, most in most portfolios, you're gonna have five to 10% emerging markets, and we think that KMQ is should be at least half of that, probably barbelled with a good value EM strategy. And you can kind of rebalance across those two. But yeah, we are constructive on the space just because we we certainly see a lot of demand from non-U.S. investors uh for the you know what we're doing with KEMQ uh just based on some of the dollar depreciation taking taking place outside of the US.
SPEAKER_00:And finally, Brandon, for anyone watching who wants to learn more about KEMQ or your research at Crane Shares, where's the best place for them to go?
SPEAKER_01:Yeah, certainly craneshares.com and uh craneshares.com backslash KEMQ. Uh but certainly uh we're always available at infocrane shares.com, you know, like like yourselves, uh, you know, uh customer service is job one. So we're always available and certainly, yeah, we produce a wealth of research. We, you know, we endeavor to earn the trust of investors through our data-driven, non-hyperbole driven research efforts. And I think that really explains, you know, why we have such a following in both the emerging market in China space today.
SPEAKER_00:Yeah, absolutely, Brendan. And it's great to have you back on the show. And thanks to everyone else for watching. Be sure to like, share, and subscribe for more episodes of Feed Leg Live.
