Is The Dip A Good Entry For Alibaba ETFs Post Solid Q2?

Chinese e-commerce giant Alibaba Group (NYSE:BABA) reported better-than-expected second-quarter fiscal 2017 results before the opening bell yesterday. The company surpassed our estimates on both revenues and earnings, suggesting that Alibaba is holding up well amid concerns over the slowdown in the Chinese economy (read: China ETF Winners One Year Post-Selloff).

Earnings of 63 cents per ADS came in above the Zacks Consensus Estimate of 47 cents. Revenues jumped 55% year over year to $5.14 billion and were slightly ahead of our estimate of $5.11 billion. Robust performance was credited to the growing core e-commerce business, booming cloud computing services and strong media and entertainment growth.

Core e-commerce revenue grew 41% year over year, cloud computing revenue skyrocketed 130% while digital media and entertainment revenue soared 30.2%. Mobile monthly active users increased 30% year over year to 450 million while annual active buyers on its China retail marketplaces reached 439 million, up 14% year over year.

Market Impact

Despite the solid earnings report, shares of BABA declined almost 4% on the day given that the SEC's ongoing investigation into Alibaba's accounting practices is heavily weighing on investor sentiment. Further, Alibaba has a dismal Value, Growth and Momentum Style Score of F, C, and F, respectively.

Meanwhile, the stock crushed its average daily volume figures, as nearly 37.1 million shares moved hands compared with just 17.2 million on daily average. However, the stock has a top Zacks Rank #1 (Strong Buy) and boasts a solid Industry Rank in the top 29% (see: all the Technology ETFs here).

Given this, ETFs having the highest allocation to this Chinese e-commerce giant will be in focus in the days ahead. Investors should closely monitor the movement in these funds and grab the opportunity when it arises. These ETFs have seen rough trading following Alibaba results.

KraneShares CSI China Internet Fund (KWEB)

This product provides concentrated exposure to the Chinese Internet market by tracking the CSI China Overseas Internet Index. In total, the fund holds 35 securities in its basket with Alibaba occupying the top spot at 12.3%. The technology sector makes up for a substantial 70% of total assets, while consumer discretionary takes the remainder with just 1% allotted to industrials. The ETF has amassed $246.8 million in its asset base and charges 72 bps in annual fees from investors. Volume is good as it exchanges 176,000 shares in hand per day. KWEB shed 2.4% in the last trading session following the Alibaba earnings announcement and currently has a Zacks ETF Rank of 5 or ‘Strong Sell’ rating with a High risk outlook.

iShares MSCI China ETF (MCHI)

This ETF follows the MSCI China Index, holding 151 securities in its basket. Out of these, Alibaba takes the third spot at 10.2% share. From a sector look, about one-third of the portfolio is allotted to information technology while financials and S-T securities round off the next three spots with double-digit exposure each. The fund has amassed over $2.3 billion in its asset base while charging 62 bps in annual fees. Volume is also solid as it exchanges about 1.4 million shares in hand on average daily basis. The ETF is down 1.6% following the results and has a Zacks ETF Rank of 3 or ‘Hold’ rating with a Medium risk outlook (read: 3 China ETFs Set to Pop on Encouraging Data).

BLDRS Emerging Markets 50 ADR Index Fund (ADRE)

The product offers exposure to the 50 emerging market-based depositary receipts by tracking the BNY Mellon Emerging Markets 50 ADR Index. About 39.7% of the portfolio is allotted to the Chinese firms with Alibaba occupying the second position at 11.8%. Brazil, Taiwan and India round off the next three spots in terms of country exposure. From a sector look, information technology accounts for 36.2%, followed by financials (16.9%), telecom services (14.6%) and energy (12%). ADRE has amassed $128.9 million in its asset base while trades in a light volume of about 7,000 shares. It charges 30 bps in fees per year and lost 1.7% on the day. ADRE has a Zacks ETF Rank of 3 with a Medium risk outlook.

Renaissance IPO ETF ( (LON:IPO) )

This ETF follows the Renaissance IPO Index, which holds the largest and most-liquid newly listed U.S. initial public offerings. Currently, the product holds 57 securities and BABA takes the second spot in the basket with 10.3% of assets. From a sector look, technology stocks make up for 30.6% share while financials, industrials and healthcare make up for a double-digit exposure each. The fund has attracted $12.1 million in its asset base and sees a paltry volume of about 43,000 shares per day on average. It charges 60 bps in fees per year and is down 0.6% post Alibaba results (read: How to Play Hot Tech IPOs With ETFs).

Guggenheim China Technology ETF (CQQQ)

This fund targets the overall technology sector in China and follows the AlphaShares China Technology Index. Holding 75 stocks, Alibaba occupies the second position in the basket with 9.9% share. In terms of industrial exposure, about 51% of the portfolio is allotted to Internet software & services while electronic components, semiconductors, and technology hardware & storage rounding off the next three spots. The product manages an asset base of $61.4 million while trades in small volume of around 16,000 shares a day. Expense ratio came in at 0.70%. CQQQ lost 1.3% on the day following Alibaba results and has a Zacks ETF Rank of 4 or ‘Sell’ rating with a High risk outlook.

First Trust International IPO ETF (FPXI)

This product provides exposure to the largest and most liquid companies that are domiciled outside the U.S. by tracking the IPOX International Index. Holding 50 stocks in its basket, Alibaba occupies the top position with 9.8% allocation. About one-fourth of the portfolio is skewed toward the Japanese firms while China and German firms round off the next two spots. From a sector look, financials takes the largest share at 34.5%, closely followed by information technology, industrials and real estate. The product has been able to manage $2.7 million in its asset base and charges 70 bps in fees per year. Volume is light, exchanging about 17,000 shares in hand on average. It shed 0.8% post Alibaba results and has a Zacks ETF Rank of 4 with a Medium risk outlook.

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GUGG-CHINA TEC (CQQQ): ETF Research Reports

ISHARS-MS CH IF (MCHI): ETF Research Reports

ALIBABA GROUP (BABA): Free Stock Analysis Report

RENAIS-IPO ETF (IPO): ETF Research Reports

FT-INTL IPO FD (FPXI): ETF Research Reports

BLDRS-EMER MKTS (ADRE): ETF Research Reports

KRANS-C CHN INT (KWEB): ETF Research Reports

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