ETFs to Watch as Alibaba Reports Fiscal Q3 Earnings

Investors can expect a heavy dose of volatility for China’s online commerce giant Alibaba during Thursday’s trading session as its set to report fiscal third-quarter earnings. Moreover, investors will wonder whether the effects of the coronavirus outbreak that has been roiling the markets will have a tangible impact on Alibaba.

From a trading standpoint, thus far the coronavirus factor isn’t reflecting in option prices. Alibaba is set to report earnings results ahead of Thursday’s market session.

‘’The looming fears of CoronaVirus impacting Alibaba’s futures guidance on Thursday’s earnings has not translated into option prices,” said Garrett DeSimone, head quant at OptionMetrics. “The implied volatility ahead of BABA’s earnings is near the pre-level’s earnings for Q3 2019 announced on Nov 1st, which is approximately 40%. These volatility levels are significantly less than previous earnings which were near 50%, demonstrated in the graph. Implied volatility measures the expectations of future price fluctuations, with large values predicting higher movements.“

ETFs with exposure to China’s tech giant include the Emerging Markets Internet & Ecommerce ETF (NYSEArca: EMQQ), which features Alibaba as one of its prime holdings with a 7.92 percent weighting as Feb. 12. EMQQ marries the idea of technology and EM in one ETF. The fund invests in companies with exposure to the ecommerce and Internet sectors in emerging markets.

Purchasing EMQQ provides exposure to companies that are positioned to benefit as emerging economies mature, the consumer class expands, and their populations increases their utilization of the Internet and ECommerce.

A few other funds to consider with Alibaba exposure:

  1. Franklin Templeton ETF Trust – Franklin FTSE China ETF (NYSEArca: FLCH): executes views on China within your emerging markets exposure, provides targeted exposure to large- and mid-sized companies in China, and seeks to provide investment results that closely correspond, before fees and expenses, to the performance of the FTSE China Capped Index.
  2. ProShares Online Retail ETF (NYSEArca: ONLN): seeks investment results, before fees and expenses, that track the performance of the ProShares Online Retail Index. The index tracks retailers that principally sell online or through other non-store channels. The index uses a modified market-capitalization weighted approach, is rebalanced monthly and is reconstituted annually.
  3. iShares MSCI China ETF (NasdaqGM: MCHI): seeks to track the investment results of the MSCI China Index. The index is a free float-adjusted market capitalization-weighted index designed to measure the performance of equity securities in the top 85% in market capitalization of the Chinese equity securities markets, as represented by the H-shares and B-shares markets.

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