Ahead of Alibaba IPO, China Tech ETFs Take Some Lumps

Alibaba’s initial public offering slated for Friday Sept. 19 and now expected to be worth $21.8 billion is easily one of the largest and most ballyhooed IPOs in recent memory.

However, some exchange traded funds tracking Chinese Internet and technology stocks are acting poorly in the run-up to Alibaba’s debut as a public company. Whether or not this scenario is a cause for concern remains to be seen, but the recent slide in ETFs that are known and possible homes to Alibaba is hard to ignore.

Just look at the Guggenheim China Technology (NYSEArca: CQQQ), an ETF that has outperformed the PowerShares QQQ (NasdaqGM: QQQ), the NASDAQ-100 tracking ETF, by two-to-one over the past two years.

“Speaking of doubles, did CQQQ create a short-term double top of late? Time will tell. A short-term support line is being taken out today by CQQQ, near the time that Alibaba is about to go public. Of late the Nasdaq is near a 52 week high, while there are more lows than highs,” notes Chris Kimble of Kimble Charting Solutions.

Interestingly, CQQQ entered Tuesday with a 4.6% decline since Sept. 5, the day Alibaba unveiled an offering range of $60 to $66 per share, which valued the company at $160 billion at the mid-point of that range. The offering range has since risen to $66 to $70. [What Alibaba’s Valuation Means for ETFs]

ETF Trends called AlphaShares, CQQQ’s index provider, to confirm whether or not Alibaba will be added to the AlphaShares China Technology Index. We have not heard back, but the ETF allocates a combined 20.7% of its weight to Tencent Holdings (OTC: TCEHY) and Baidu (NasdaqGS: BIDU), which could make it sensitive to Alibaba’s performance post-IPO. Six of CQQQ’s top-10 holdings are Internet stocks.

The Global X NASDAQ China Technology ETF (NasdaqGM: QQQC), a direct rival to CQQQ, is off 4.5% since Sept. 5. It is not yet known whether that ETF will hold Alibaba, but it is reasonable to expect the fund could be an Alibaba home at some point. Like the Powershares Golden Dragon Halter USX China Portfolio (NYSEArca: PGJ), QQQC tracks a NASDAQ index, and is known that PGJ’s underlying index will eventually make room for Alibaba. [This ETF Will Probably Add Alibaba]