Alibaba Group Holding (NYSE: BABA) lockup period will soon expire, but China equities and initial public offering-related exchange traded funds with heavy exposure to Alibaba remain relatively unfazed.
For instance, the KraneShares CSI China Internet Fund (NasdaqGM: KWEB), which has a 10.5% position in BABA, saw $6.4 million in inflows over the past week and the Emerging Markets Internet & Ecommerce ETF (NYSEArca: EMQQ), which has a 9.9% tilt toward BABA, added $1.1 million over the past week, according to ETF.com data. [New ETF Gets Right to it With EM Internet Stocks]
Other ETFs that have notable weights in BABA include the KraneShares CSI New China ETF (NYSEArca: KFYP) with a 15.8% position and the Renaissance IPO ETF (NYSEArca: IPO) with a 11.5% position.
The lockup period for 8.1 million Alibaba shares will expire tomorrow, December 19, allowing insiders to sell their shares, reports Leslie Picker for Bloomberg. [Talk Still Swirling About Alibaba’s Index Opportunities]
While lockup expirations have pressured newly public corporations, the number of shares in the December period only represents 1.6% of shares eligible to trade. Traditionally, lockup expirations may spook investors since a sudden influx of company shares could outpace demand, depressing stock prices.
Looking ahead, future lockup expirations could cause a greater commotion. For example, 429 million shares owned by insiders will become free to trade in March and another 1.6 billion shares will be available in September.
“We don’t see the December lockup expiration as a significant headwind for Alibaba,” Max Wolff, chief economist at Manhattan Venture Partners, said in the Bloomberg article. “March and September are the ones to watch.”
Nevertheless, the investment thesis for the Chinese online retailer remains sound. Consumer spending could still climb as a new emerging middle-class takes shape in China and the country shifts from a export-oriented economic model to domestic consumption.
Alibaba stock has been weakening since the November highs. However, BABA is settling into a healthy consolidation phase that could turn into a bull flag pattern, writes Serge Berger for InvestorPlace. Additionally, BABA recently broke out of a diagonal resistance line from the November highs.
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Max Chen contributed to this article.