China Internet ETFs Buck Outflow Trend

ETF Trends

Stop the presses.

The iShares China Large-Cap ETF (FXI) lost $87.5 million on Monday, bringing year-to-date departures from the ETF to $380.7 million, reports Elena Popina for Bloomberg. That after FXI was one of the 10 worst ETFs in terms of 2013 outflows. Do not shed too many tears for FXI. It is the largest China ETF by assets with $5.25 billion and one of the largest single-country emerging markets ETFs.

FXI, an ETF comprised of just 27 stocks and a sometimes risky 53.4% weight to financials, garners the bulk of the attention among China ETFs, something many ETF industry observers already know. That is especially true when talk of corporate defaults and shadow banking enter the conversation, which is another way of saying a better than 53% weight to bank stocks can leave FXI vulnerable to controversy and possible shocks in the Chinese banking system. [China Without the Banks]

Bottom line: In the current environment, outflows from FXI are not too surprising and they are not afflicting all China ETFs. In a sequel to what was seen in 2013, China ETFs heavy on large-cap, state-run companies are bleeding cash while funds focusing on the country’s Internet stocks are pulling in assets. [A Great Year for Some China ETFs]

The Guggenheim China Technology ETF (CQQQ), which mixes technology names such as Lenovo with pure Internet plays such as Baidu (BIDU) and Sina (SINA), has brought in $14.4 million, or 16% of its current assets under management total, this year. Though smaller than CQQQ, the rival Global X NASDAQ China Technology ETF (QQQC) has seen 2014 inflows that equal more than 20% of its current AUM total. [ETFs for Exposure to China's Mobile Gaming Boom]

The KraneShares CSI China Internet Fund (KWEB) , which is the purest ETF play on Chinese Internet stocks, had less than $29 million in assets at the end of last year. That number is now nearly $78 million, which is not too shabby considering the ETF started trading in early August 2013. KWEB is the top-performing non-leveraged emerging markets ETF over the past month with a gain of more than 14%. CQQQ and QQQC are both up more than 6% over the same period while FXI is lower by 4.2%. [Getting Selective With Emerging Markets ETFs]

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