Chinese e-commerce div Alibaba Group (BABA – Free Report) published the results of fiscal 2019 in the second quarter before the sound launch on November 2, explaining expectations for earnings but lagging behind on revenue.
Earning $ 1.01 per ADS was 19 cents above the Zacks Consensus Estimate. Revenues jumped 54% compared to last year, to $ 12.34 billion, down to an estimated $ 12.65 billion. Strong revenue growth was attributed to the growing core of e-commerce, fast-paced computing services and strong media and the growth of entertainment. Basic e-commerce revenue grew by 56% compared to the same period last year, revenues from renewed computing rose by 90%, revenue from digital media and entertainment increased by 24%.
Alibaba had another strong quarter of rapid growth, as annual active consumers increased 25 million compared to last quarter and reached 601 million in 12 months as of September 30, 2018. Mobile monthly active users in Chinese markets increased 32 million quarters over the quarter to 666 million (see: all ETF technology here).
Chinese e-commerce div declined revenue forecasts for the fiscal year by 4-6%, citing growing doubts in the economy, as China's expansion slowed down to the worst pace in nearly a decade, as well as concern over the economic downturn in the US-China trade war. The company will keep on making profits from potential new sources of revenue, such as billing vendors for a recommendation on a redesigned Taobao interface, as long as economic conditions are not improved.
Impact of the market
After mixed results, BABA shares fell by 2.4% per day. Shares have been affected in the last few months due to the tensions of the current trade war with the United States and regulations. Alibaba currently has Zacks Rank # 3 (Hold) and VGM Score of D. It belongs to the lowest ranking Zacks industry (bottom 40%).
Because of this, the ETFs that have the biggest share in Chinese e-commerce gossip are in focus for the coming days. Below we have highlighted six ETFs in detail:
Invesco BLDRS Emerging Markets 50 ADR Index Fund (ADRA – Free Report)
The product offers the exposure of 50 stock market certificates based on the BNY Mellon Emerging Markets 50 ADR index. Approximately 41.5% of the portfolio is allocated to Chinese companies with which Alibaba occupies a top position at 16.6%. Brazil, Taiwan and India round off the next three places in terms of country exposure. Consumer discretion, finance, communications services, information technology and energy are the top five sectors. ADRE has collected $ 130.9 million in assets, while trading in approximately 12,000 shares. The fee charges 18 bps per year and lost 0.4% a day. ADRE has Zacks ETF rank # 3 with medium risk (see Emerging Markets Dip for Quarter Successive Low: ETFs in Focus).
Invesco BLDRS Asia 50 ADR Index Fund (ADRA – Free Report)
This ETF follows the BNY Mellon Asia 50 ADR Index and monitors the performance of around 50 Asian DR markets. The largest share of Chinese companies is 34 percent, and Alibaba at the top of 12.5 percent. Japanese companies account for 31.8% of assets. Investors are often ignored by ADRA, as shown in its AUM of $ 18 million and an average daily volume of around 1,000 shares. It charges 30 bps per year of fees and adds 1.2% to the day post BABA results. The fund has Zacks ETF rank # 3 with a medium-risk outlook.
SPDR S & P China ETF (GXC – Free Report)
This product is tracked by S & P China BMI, which handles investors 59 bps a year. It has 367 stocks in its basket, with Alibaba taking second place at 12.1%. From the point of view of the sector, the largest share was recorded by financial and discretionary consumers at 22.9 and 21.6 percent, while information technology and communications services rounded off the following two places. The ETF raised $ 964 million in the assets base and recorded an average daily volume of 66,000 shares. This was added 0.1% after Alibaba results and has Zacks ETF rank # 3 with medium-risk outlook (read: China Manufacturing over 2 years low: ETFs in focus).
iShares MSCI China ETF (MCHI – Free Report)
This ETF is tracked by the MSCI China Index, which has 293 securities in its basket. Of them, Alibaba occupies second place with a share of 11.9%. Of the sectoral outlook, around 26.2% of the portfolio is allocated to communication, while financial assets (23.4%) and consumer discretion (20.5%) round off the following two positions. The fund raised $ 3.7 billion in its assets, charging 62 bps a year. The volume is also solid because it exchanges nearly 4.5 million shares on average daily. The ETF gained 0.2% after the result and has 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. Holding 74 shares, Alibaba occupies second place in the basket with a share of 9.8%. The product manages the base of $ 443.7 million in assets, and trades in a good volume of around 167,000 shares a day. The expense ratio is 0.70%. CQQQ dropped to 0.4% a day, following Alibaba's results and carries the rank Zacks ETF # 3 with a high risk outlook.
KraneShares CSI China Internet Fund (KWEB – Free Report)
This product provides a concentrated exposure to the Chinese Internet market, following the CSI China Overseas Internet Index. In total, the fund has 48 securities in its basket, while Alibaba occupies second place at 8.9%. The communications sector makes up 52% of the total assets, while the discretionary consumer rights are 26%. The ETF has a $ 1.6 billion AUM and pays 70 bps annually from the investor fee. The volume is solid because it exchanges about 1.3 million shares in hand per day. In the last trading session, KWEB fell by 1% after the release of Alibaba's earnings, and currently has Zacks ETF rank # 3 with high risk.
Want to deliver key ETF information directly to your Inbox?
Zack's free newsletter FOND will let you know the top news and analysis as well as the best performing ETFs every week. Release it >>