ETF Chart of the Day: Love for China's Internet

Yesterday we alluded to the potential uptick in activity in Chinese Internet and Technology focused ETFs given not only the equity market distress currently in China, but the presence of what appeared to be a cyber-attack earlier in the week affecting numerous mainstream websites there.

CQQQ (Guggenheim China Technology, Expense Ratio 0.70%) may not be on everyone’s short list of ETFs to watch on a daily basis, as it only has about $82.1 million in assets under management, but as expected the fund has seen an uptick in trading activity this week as it has fallen sharply, retreating near its 50 day MA this morning.

Top holdings in CQQQ are Tencent Holdings Ltd. (10.33%), BIDU (9.25%), Lenovo Group Ltd. (7.77%), QIHU (7.21%), and SINA (6.36%). Some other names in the basket may be a bit more well known to U.S. investors like NTES and SOHU, as those companies have traded publicly on the U.S. exchanges since the mid-2000s, and it is worth noting that there are a combination ADRs and ordinary shares held in the portfolio (63 total holdings).

QQQC (Global X NASDAQ China Technology, Expense Ratio 0.65%) is significantly smaller, with only $16.2 million in AUM, and the fund only has 28 holdings in comparison to CQQQ’s 63. It tracks the NASDAQ OMX Technology Index whereas CQQQ tracks the proprietary AlphaShares China Technology Index.

From a market cap perspective the funds look fairly similar, as CQQQ has more than 70% of its portfolio in mega/large-caps, about 24% in mid-cap stocks, and the remaining 6% in small caps. QQQC on the other hand has more than 71% of its allocations in mega/large-caps, about 21% in mid-caps, and the remaining 7.8% or so in small-caps.

Aside from Technology for the moment, there is an interesting niche trend tracking product that tracks the Chinese equity market that is worth keeping an eye on as a potential barometer of this broad China sell-off. TCHI (RBS China Trendpilot ETN, Expense Ratio 1.10%) is designed to track the BNY Mellon China Select ADR Total Return Index and move from a cash position into an all in-equity position in China dependent on if the closing level of the benchmark index is above (all in equity) or below (in cash essentially via T-Bills) its historical 100-Index business day simple moving average (for three consecutive index
business days).