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Alibaba Beats on Earnings, Lowers Guidance: ETFs in Focus – November 5, 2018



Chinese electronic trading giant Alibaba Group (BABA Free report) reported the results of the fiscal 2019 of the second quarter before the opening campaign on November 2, where it exceeded the expectations of gains but was delayed.

Revenues of $ 1.01 per ADS reached 19 cents above the Zacks Consensus. Revenues jumped 54% year-on-year to 12.34 million dollars and were out of the 12.65 million dollar estimate. The robust revenue growth has been credited to a growing nucleus of e-commerce businesses, rapidly growing cloud computing services and strong media and entertainment growth. Basic e-commerce earnings grew 56% year-on-year, cloud computing revenues increased 90%, and revenues by digital media and entertainment increased 24%.

Alibaba had another strong quarter of rapid growth, as annual consumer assets increased 25 million in the last quarter to reach 601 million in the twelve months ending September 30, 2018. Active monthly mobile users in their retail markets of China increased 32 million quarter by quarter to 666 million (see: all technological ETFs here).

The Chinese electronic commerce giant reduced revenue forecast for the fiscal year by 4-6%, citing growing doubts about the economy as China's expansion recently slowed down to its weakest pace in almost a decade, as well as concerns about the economic fall of the United States-China commercial war. The company will maintain the monetary appreciation of the new possible revenue streams, such as the merchants' charge for recommendation rates in their redesigned Taobao interface, until they improve the economic conditions.

Impact of the market

After mixed results, BABA's shares fell 2.4% a day. The stock was very bad in recent months due to the tensions stemming from a current trade war with the United States and the regulations. Alibaba currently has a Zacks Rank # 3 (Hold) and a VGM Score from D. It belongs to the lowest Zacks industry (less than 40%).

Given this, ETFs that have the largest allocation to the Chinese electronic commerce giant are in focus for the next few days. Below we highlight six ETFs in detail:

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

The product offers exposure to 50 emerging market-based deposit receipts following the BNY Mellon Emerging Markets 50 ADR Index. About 41.5% of the portfolio is assigned to Chinese companies with Alibaba holding the first place at 16.6%. Brazil, Taiwan and India round out the next three places in terms of exposure to the country. Discretionary consumers, financial, communication services, information technology and energy are the five main sectors. ADRE has accumulated $ 130.9 million in its asset base while trading a lightweight volume of around 12,000 shares. He charges 18 bps in fees per year and loses 0.4% a day. ADRE has a Zacks ETF Rank # 3 with a medium risk perspective (read: Emerging emergent Dip for the 4th successive Debt: ETF in focus).

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

This ETF follows the BNY Mellon Asia 50 DNA index with uppercase and tracks the performance of approximately 50 DRs based on the Asian market. Chinese companies make up the largest share in 34%, with Alibaba in the first position with 12.5% ‚Äč‚Äčallocation. Japanese companies represent 31.8% of assets. ADRA is often overlooked by investments such as its AUM of $ 18 million and average daily volume of about 1,000 shares. She charges 30 bps in annual fees and added 1.2% in the results of the BABA day. The bottom has a Zacks ETF Rank # 3 with a medium risk perspective.

SPDR S & P China ETF (GXC Free report)

This product follows the BMI Index of S & P China, which charges 59 bps of investors in annual points. It contains 367 stocks in the basket with Alibaba occupying the second place in 12.1%. From the sectoral aspect, the finances and the discrecionalities of the consumers assume the largest participation in 22.9% and 21.6%, respectively, while information technology and communication services round out the next two points. The ETF has accumulated $ 964 million in its asset base and sees an average volume of 66,000 shares a day. Added 0.1% after the results of Alibaba and has a Zacks ETF Rank # 3 with a medium risk perspective (read: China Manufacturing More than 2-Year Low: ETFs in Focus).

iShares MSCI China ETF (MCHI Free report)

This ETF follows the MSCI China Index, which has 293 titles in its basket. Of them, Alibaba takes second place with 11.9% participation. From a sectoral point of view, 26.2% of the portfolio is distributed to communication, while finances (23.4%) and consumer discretion (20.5%) round the next two places. The fund has accumulated $ 3.7 billion in its asset base, while charging 62 bp in annual fees. The volume is also solid, since it changes about 4.5 million shares on an average daily basis. The ETF won 0.2% based on the results and has a Zacks ETF Rank # 3 with a medium risk perspective.

Invesco China Technology ETF (CQQQ Free report)

This fund targets the technology sector in general in China and follows the China Technology Index AlphaShares. Keeping 74 stocks, Alibaba occupies the second position in the basket with a 9.8% stake. The product manages an asset base of 443.7 million dollars while trading in volume volume about 167,000 shares per day. The cost ratio reaches 0.70%. The CQQQ fell 0.4% a day, following the results of Alibaba and has a Zacks ETF Rank # 3 with a high risk perspective.

KraneShares CSI China Internet Fund (KWEB Free report)

This product offers concentrated exposure to China's Internet marketplace following the China Overseas CSI Internet Index. In total, the fund has 48 titles in its basket with Alibaba occupying the second place in 8.9%. The communications sector accounts for an important 52% of the total assets, while the discretionary consumer has a 26% stake. The ETF has a AUM of $ 1.6 billion and charges 70 bps in annual investment rates. The volume is solid, as it changes around 1.3 million shares per day. KWEB fell 1% at the last trading session, following the Alibaba earnings announcement and currently has a Zacks ETF Rank # 3 with a high risk perspective.

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