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ETFs to Tap Alibaba's Stunning Hong Kong Debut

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Chinese e-commerce giant Alibaba Group (BABA - Free Report) made a blockbuster Hong Kong debut with the share price popping up more than 8% in the early trading hours. If the gains continue, it will be among the best first-day performances involving the biggest IPOs in the city since 2005, after AIA Group (17.1%), Bank of China (15.3%), Industrial and Commercial Bank of China (14.7%) and China Unicom (8.9%).

Asia’s most-valuable company raised $11.3 billion through the company’s secondary listing by pricing 500 million shares at HK$176 each. The amount could rise to $12.9 billion if an over-allotment option is exercised. The listing represents the biggest IPO globally this year and the largest in Hong Kong in nearly a decade (see: all the Technology ETFs here).

The move will give Alibaba fresh capital for some of its newer businesses such as food delivery and physical retailing. The impressive homecoming debut by the Chinese Internet giant fueled confidence among investors’ and Hong Kong’s reputation internationally as a financial hub, which has been hindered by long-running anti-government protests in the city. The listing in mainland China will now allow Chinese investors to buy and sell Alibaba shares easily at home amid rising trade tensions.

ETFs to Tap

Investors seeking to capitalize the stunning Hong Kong debut of the Chinese e-commerce giant could consider from the list of the following ETFs:

Invesco BLDRS Emerging Markets 50 ADR Index Fund (ADRE - Free Report)
 
The product offers exposure to 50 emerging market-based depositary receipts by tracking the S&P/BNY Mellon Emerging Markets 50 ADR Index. About 43.3% of the portfolio is allotted to Chinese firms with Alibaba occupying the top position at 21.4%. Taiwan, Brazil and India round off the next three spots in terms of country exposure. ADRE has amassed $178.8 million in its asset base while trading in a light volume of about 5,000 shares. It charges 18 bps in fees per year and has a Zacks ETF Rank #4 (Sell) with a Medium risk outlook (read: Alibaba's Q2 Earnings Beat Puts These ETFs in Focus).

Invesco BLDRS Asia 50 ADR Index Fund (ADRA - Free Report)

This ETF follows the capitalization-weighted S&P/BNY Mellon Asia 50 ADR Index and tracks the performance of approximately 50 Asian market-based DRs. Alibaba occupies the top position with 16.4% allocation. Japanese firms make up for the largest share at 33.3% while Chinese firms account for 32.7% of the assets. ADRA is often overlooked by investors as evident from its AUM of $18 million and average daily volume of about 1,000 shares. It charges 30 bps in annual fees and has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.

iShares MSCI China ETF (MCHI - Free Report)

This ETF offers exposure to large and mid-sized companies in China and follows the MSCI China Index. Holding 461 securities in its basket, Alibaba takes the top spot with 14.7% share. The fund has amassed $4 billion in its asset base while charging 59 bps in annual fees. Volume is also solid as it exchanges nearly 3.4 million shares on average daily basis. The ETF has a Zacks ETF Rank #3 with a Medium risk outlook (read: ETFs in Focus as China Cuts Key Repo Rate).

Franklin FTSE China ETF (FLCH - Free Report)

This product follows the FTSE China Capped Index, charging investors 19 bps in annual points. It holds 764 stocks in its basket with Alibaba taking the top spot at 14.6%. The ETF has amassed $37.1 million in its asset base and sees average daily volume of 7,000 shares. It has a Zacks ETF Rank #3.

ProShares Online Retail ETF (ONLN - Free Report)

This ETF lets investors’ tap into the potential growth of online retail by pinpointing retailers that principally sell online or through other non-store channels, and then zeroing in on the companies reshaping the retail space. It follows the ProShares Online Retail Index, holding 24 stocks in its basket. While American firms dominate the portfolio with three-fourth share, Chinese firms account for 20.6% with Alibaba taking the second spot and accounting for about 12% share. The product has amassed $21.6 million in its asset base while trading in a paltry volume of around 10,000 shares a day on average. It charges 58 bps in annual fees from investors (read: Gearing Up for Holiday Season: Amazon Versus Walmart ETFs).

WisdomTree China ex-State-Owned Enterprises Fund (CXSE - Free Report)

This fund offers exposure to targeted Chinese stocks that are not state-owned enterprises. It tracks the WisdomTree China ex-State-Owned Enterprises Index, charging 32 bps in annual fees. Holding 150 securities in its basket, Alibaba is the top firm accounting for 12.4% share. The product has been able to manage $128.2 million in its asset base and trades in volume of 11,000 shares a day on average. It has a Zacks ETF Rank #3 with a Medium risk outlook.

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