“A nice feature of CN is its 11 percent allocation to technology stocks, something often lacking in the more popular China ETFs. And it looks like the ETF will be able to include the next wave of Chinese tech companies listing in the U.S., such as Alibaba Group Holding Ltd. Many of the most popular China ETFs will never hold Alibaba, which makes no sense, since it could very well be the biggest tech IPO in history,” writes Eric Balchunas for Bloomberg.
Since Alibaba has confirmed it will list its shares in the U.S., the stock can only accessed by investors on mainland China via a domestic equivalent of the PowerShares QQQ (NYSEArca: QQQ). That means Alibaba will not pop up in A-shares ETFs. [ETFs for the Alibaba IPO]
Additionally, because Alibaba is not expected to have a Hong Kong listing and as such be treated as an American depositary receipt, it is unlikely to find a home in FXI.
The Alibaba IPO alone does not make CN, or any China ETF for that matter, perfect, but the new offering has its a high points beyond the aforementioned deep lineup. Those include an index dividend yield of 2.84%, decent among ETFs, and a price-to-book ratio of 1.55, according to Deutsche Bank data. That is about half the price-to-book ratio on the MSCI Emerging Markets Index.
db X-trackers Harvest MSCI All China Equity Fund
Chart Courtesy: Deutsche Bank
Tom Lydon’s clients own shares of QQQ.