By now, most investors that actively follow momentum stocks know the tale of woe regarding once high-flying Chinese Internet names.
Things were going according to plan until early March when the air was let out of the momentum balloon. Heading into Wednesday’s trading session, the Guggenheim China Technology ETF (NYSEArca: CQQQ), Powershares Golden Dragon Halter USX China Portfolio (NYSEArca: PGJ) and the KraneShares CSI China Internet Fund (NasdaqGM: KWEB) had lost an average of 18.5% since March 6. [Internet, Social Media ETFs Tank]
Momentum ETFs, including the aforementioned, got plenty of attention on the way down, but some Chinese Internet fare has been quietly perking up since the start of May. With Wednesday’s gains, PGJ and KWEB are higher by 1.6% and 2.7%, respectively, since May 1.
Some of the rebound may attributable to anticipation of the Alibaba initial public offering, but there is only so much a company that is not public yet can do for any ETF. [ETFs for the Alibaba IPO]
Going back to May 1, several of the marquee names found in ETFs such as KWEB and PGJ have been lagging the ETFs and are still in the red. However, some of those same stocks have been on a tear since May 8th.
For example, shares of Baidu (NasdaqGS: BIDU), China’s largest Internet search provider, are up nearly 9% since May 8th. Qihoo 360 Technology (NasdsaqGS: QIHU) is up 11.5% over that time while YY (NasdaqGS: YY) is higher 7.6%.
Those stocks combine for over 18% of KWEB’s weight and 17.4% of PGJ’s weight. The $248.6 million PGJ is not a pure Internet or technology ETF, but the fund does allocate 51.4% of its weight to the tech sector, more than double the weight devoted to consumer discretionary names.
Other stocks are lifting KWEB and PGJ as well and in more significant fashion than Baidu or even Qihoo 360. Since May 8th, 21Vianet Group (NasdaqGS: VNET) is up 11.7%, which sounds impressive until considering the average gain posted by Ctrip.com (NasdaqGS: CTRP) and Vipshop Holdings (NYSE: VIPS) over that time is 26%.
Ctrip’s upside since May 8th is nearly quadruple that of Priceline.com (NasdaqGS: PCLN). The former is PGJ’s largest holding at a weight of 9.1%. The ETF also features a 5.8% weight to Vipshop.
Ctrip, Vipshop and 21Vianet combine for 20.2% of KWEB’s weight, according to KraneShares data.
KraneShares CSI China Internet Fund
