ETF Chart of the Day: Betrayed by BABA

With BABA stock under immense pressure today post earnings and dipping below the $90 level for the first time since October of last year, KWEB (KraneShares CSI China Internet, Expense Ratio 0.68%) with its heaviest weighting in the stock (>10.2%) comes to mind.

In all, the fund invests in fifty five individual names that are positioned for exposure in the Chinese Internet industry, with other top holdings following BABA consisting of Tencent Holdings Ltd (>8.6%), BIDU (>8.1%), JD (7%), and NTES (>6.1%). SINA, YOKU, CTRP, QIHU, and VIPS round out the top ten holdings in KWEB.

60% of the portfolio resides across these top ten names in terms of exposure, and of course Technology has a hefty weighting in terms of sector concentration (>74.8%) followed by Consumer Discretionary (>22.7%). A second KraneShares product but certainly lesser known than $194 million KWEB is KFYP (CSI China Five Year Plan, Expense Ratio 0.68%) actually has a higher weighting to BABA than KWEB at about 15.09%.

This fund is substantially smaller with $3.4 million in assets under management currently and trading volume has been scarce at times. There is no reason to think the low activity continues however with BABA trading as low as $87.36 thus far this morning in early trading.

Given BABA’s limited trading history having IPO’ed last September, we see the stock ultimately traded as low as $82.81 albeit briefly, last October. Clearly, there are new technical levels of interest being established today with the action in the stock amid heavier than average volume. Speaking of IPO’s, two IPO specific ETF strategies FPXI (First Trust International IPO, Expense Ratio 0.70%) and IPO (Renaissance IPO, Expense Ratio 0.60%) have >9.8% and >9.5% weightings to BABA themselves, and although they are also relatively small funds with $2.8 million and $27.6 million in AUM respectively, these could potentially see upticks in trading interest much like KWEB and KFYP on BABA alone.