This should have been a good day for momentum stocks, particularly of the Internet varietal, and the exchange traded funds that own those shares.
Tuesday evening, Chinese e-commerce giant Alibaba filed for an initial public offering that could be the largest in U.S. history. Internet stocks and ETFs are not just yawning after the Alibaba IPO news. These ETFs are being taken to the woodshed.
Twitter (NYSE: TWTR) is one culprit. The social media company is down 4.7% at this writing on volume that is already nearly triple the daily average. Factoring in today’s drop, Twitter is down 30% over the past month and the stock is flirting with a drop below $26, where it opened on its first day of trading.
The Global X Social Media Index ETF (NasdaqGM: SOCL) is down 3.4% and is trading at its lowest level since July 2013. SOCL, which is in bear market territory, has lost over 10% in just the past month. Twitter’s eroding market value means the stock has fallen out of the ETF’s top-10 holdings, but the fund has also been punished by the likes of China’s Tencent, Sina (NasdaqGS: SINA) and Facebook (NasdaqGS: FB). Those stocks combine for about 28% of SOCL’s weight. [Social Media ETF Flirts With Bear Market]
Heading into Wednesday, Tencent and Sina were down an average of 6.5% over the past month. As it has for SOCL, Tencent has been a thorn in the side of the KraneShares CSI China Internet Fund (NasdaqGM: KWEB). [ETFs Where Alibaba Will Land]
Although KWEB will likely be one of the first ETFs to hold shares of Alibaba, the fund is down 4.3% Wednesday. Seven of KWEB’s top-10 holdings are down over the past month.
To be fair, U.S.-focused Internet ETFs are suffering today as well and some of that downside can be attributed to the possibility of increased competition from Alibaba. For example, the First Trust Dow Jones Internet Index Fund (NYSEArca: FDN) is down 2% and trading at its lowest levels since October 2013.