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Alibaba wins, lowers guidance: ETF in focus – November 5, 2018


Chinese e-commerce giant Alibaba Group (BABA Free Report) reported earnings for the second quarter of 2019 before the opening block on November 2, which saw earnings expectations but was lowered on revenues.

Revenues of $ 1.01 per ADS came in 19 cents over Zack's Consensus Estimate. Revenues jumped 54% year-on-year to $ 12.34 billion and fell under tax of $ 12.65 billion. The robust revenue growth credited to a thriving e-commerce industry, fast-growing cloud computing services and strong media and entertainment development. Core e-commerce revenue increased by 56% the year before, cloud computing revenue increased 90% and digital media and entertainment revenue increased 24%.

Alibaba had another strong quarter of rapid growth as annual active consumers increased 25 million from the last quarter to reach 601 million in the 12 months ending September 30, 2018. Mobile monthly users on their Chinese retail increased 32 million quarters over the quarter to 666 million (see: all technology ETFs here).

Chinese e-commerce giant reduced its revenue forecast by 4-6% in view of growing doubts about the economy, as China's expansion recently declined to its weakest rate in almost a decade, as well as concerns about the economic downturn from the US and China trade war. The company will continue to earn money from potential new revenue streams, such as charging merchants for reimbursement fees on the revised Taobao interface, until economic conditions are improved.

market Effects

After the mixed results, the BABA shares fell by 2.4% on the day. The stock has been badly affected in recent months due to tensions from an ongoing trade war with the United States and the regulations. Alibaba currently has a Zacks Rank # 3 (Team) and a VGM score of D. It belongs to the lower ranked Zacks industry (under 40%).

In view of this, ETFs have the highest award for the Chinese e-commerce giant in focus for the coming days. Below we have highlighted six ETFs in detail:

Invesco BLDRS Emerging Markets 50 ADR Index Fund (ADRE Free report)

The product offers exposure to the 50 growth-based revenue by tracking the BNY Mellon Emerging Markets 50 ADR Index. About 41.5% of the portfolio is awarded to Chinese companies with Alibaba, which occupies the top position of 16.6%. Brazil, Taiwan and India round off the three following places in terms of land exposure. Consumer discretionary, economics, communication services, information technology and energy are the five major sectors. ADRE has raised $ 130.9 million in its asset base while trading with a light volume of approximately 12,000 shares. It costs 18 bps in fees per year and lost 0.4% on the day. ADRE has a Zacks ETF Rank # 3 with a Medium Risk Outlook (read: Emerging Markets Dip for 4th successive weak: ETFs in focus).

Invesco BLDRS Asia 50 ADR Index Fund (ADRA Free report)

This ETF follows the capitalization-based BNY Mellon Asia 50 ADR Index and tracks the performance of approximately 50 Asian market-based DR devices. Chinese companies represent the largest share of 34%, with Alibaba in the top position with 12.5% ​​distribution. Japanese companies account for 31.8% of the assets. ADRA is often overlooked by investors depicted by its AUM of $ 18 million and an average daily volume of approximately 1,000 shares. It takes 30 bps in annual fees and adds 1.2% on the day after BABA results. The fund has a Zacks ETF Rank # 3 with a Medium Risk Outlook.

SPDR S & P China ETF (GXC Free report)

This product follows the S & P China BMI Index, which charges investors 59 bps in annual points. It holds 367 shares in its basket with Alibaba taking the second place at 12.1%. From a sector segment, financial and consumer discretion accounts for the largest share of 22.9% and 21.6%, while information technology and communications services round the following two places. ETF has accumulated $ 964 million in its asset base and sees an average daily volume of 66,000 shares. It provided 0.1% for Alibaba results and has a Zacks ETF Rank # 3 with a Medium Risk Outlook (read: China Manufacturing More than 2 years low: ETFs in focus).

iShares MSCI China ETF (MCHI Free report)

This ETF complies with the MSCI China Index, which holds 293 securities in its basket. Of these, Alibaba takes the second place with 11.9% share. From a sector search, approximately 26.2% of the portfolio is communicated while financial (23.4%) and consumer discretionary (20.5%) round the two closest locations. The fund has collected $ 3.7 billion in its asset base, while taking out 62 bps in annual fees. The volume is also solid as it exchanges almost 4.5 million shares on average per day. ETF received 0.2% after the results and has a Zacks ETF Rank # 3 with a Medium Risk outlook.

Invesco China Technology ETF (CQQQ Free report)

This fund targets the overall technology sector in China and follows AlphaShares China Technology Index. Holdings 74 shares, Alibaba occupies the second position in the basket with 9.8% share. The product manages an asset base of $ 443.7 million, while trading is in good volume at about 167,000 shares per day. Expense ratio comes in at 0.70%. CQQQ dropped 0.4% the day after Alibaba's results and carries a Zacks ETF Rank # 3 with a high risk view.

KraneShares CSI China Internet Fund (KWEB Free report)

This product provides a concentrated exposure to China's internet market by tracing the CSI China Overseas Internet Index. In total, the fund holds 48 securities in its basket with Alibaba which occupies the second place of 8.9%. The communications sector accounts for a significant 52% of total assets, while the consumer discretionary takes 26% share. ETF has AUM $ 1.6 billion and charges 70 bps in annual fees from investors. The volume is solid because it exchanges approximately 1.3 million shares in hand per day. The KWEB was down 1% during the latest trading session, following Alibaba's earnings announcement, and currently has a Zacks ETF Rank # 3 with a high risk view.

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