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6 ETFs Gain on Alibaba (BABA) Robust Earnings

Zacks Investment Research

Chinese e-commerce giant Alibaba Group Holding Ltd (NYSE:BABA) reported fourth-quarter fiscal 2018 results before the opening bell yesterday wherein it surpassed both the earnings and revenue expectation and provided an upbeat fiscal revenue guidance.

6 ETFs Gain on Alibaba (BABA) Robust Earnings

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Earnings of 91 per ADS came in three cents above the Zacks Consensus Estimate. Revenues jumped 61% year over year to $9.87 billion and surpassed the estimate of $9.17 billion. The robust revenue performance was credited to a growing core e-commerce business, booming cloud computing services and strong media and entertainment growth.

Core e-commerce revenues grew 62% year over year, cloud computing revenues soared 103% while digital media and entertainment revenues increased 34%. Mobile monthly active users in its China retail marketplaces increased 37% year over year to 617 million, while annual active buyers totaled 552 million, up 37% year over year.

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The Chinese online retail giant has been expanding its presence in core online retail business with investments in supermarkets and stores as well as in new artificial intelligence and cloud computing businesses. Alibaba acquired a 33% stake in Ant Financial, the electronic payment firm Alibaba spun off in 2011. As such, it expects revenues to grow 60% in fiscal 2019, acceleration from 58% year-over-year revenue growth seen in fiscal 2018, or above 50% excluding businesses that are being acquired.

Market Impact

Based on solid earnings results, BABA shares rose 3.5% on the day. The positive momentum is likely to continue given that the stock has a Zacks Rank #3 (Hold) and a Growth Score of B though it belongs to the bottom-ranked Zacks industry (bottom 39%).

Given this, investors may want to bet on Alibaba for higher returns. As a result, we have highlighted six ETFs having the highest allocation to the Chinese e-commerce giant that have upside potential in the coming months.


ETFs Gain on Alibaba (BABA) Robust Earnings: BLDRS Emerging Markets 50 ADR Index Fund (ADRE)

BLDRS Emerging Markets 50 ADR Index Fund (NASDAQ:ADRE) offers exposure to the 50 emerging market-based depositary receipts by tracking the BNY Mellon Emerging Markets 50 ADR Index.

About 44% of the portfolio is allotted to the Chinese firms with Alibaba occupying the top position at 17.6%. Brazil, Taiwan and South Korea round off the next three spots, in terms of country exposure. From a sector look, information technology accounts for 41.7% share, followed by financials (16.2%), telecom services (10.9%) and energy (9.8%).

ADRE has amassed $166.1 million in its asset base while trades in a light volume of about 13,000 shares. It charges 18 bps in fees per year and added 0.8% on the day. ADRE has a Zacks ETF Rank #3 with a Medium risk outlook.


ETFs Gain on Alibaba (BABA) Robust Earnings: iShares MSCI China Index Fund (MCHI)

The iShares MSCI China Index Fund (NASDAQ:MCHI) follows the MSCI China Index, holding 154 securities in its basket. Of these, Alibaba takes the second spot with 13.4% share.

From a sector look, about 40.5% of the portfolio is allotted to information technology while financials (22.8%) and consumer discretionary (8.8%) round off the next three spots. The fund has amassed $3.6 billion in its asset base while charging 62 bps in annual fees.

Volume is also solid as it exchanges nearly 2.7 million shares on average daily basis. The ETF gained 1% following the results and has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook.


ETFs Gain on Alibaba (BABA) Robust Earnings: BLDRS Asia 50 ADR Index Fund (ADRA)

The BLDRS Asia 50 ADR Index Fund (NASDAQ:ADRA) follows the capitalization-weighted BNY Mellon Asia 50 ADR Index and tracks the performance of approximately 50 Asian market-based DRs.

Chinese firms make up for the largest share at 35.7% with Alibaba at the top position with 12.9% allocation, while Japanese firms account for 33.3% of assets.

ADRA is often overlooked by investors as depicted by its AUM of $22.3 million and average daily volume of under 2,000 shares. It charges 30 bps in annual fees and climbed 1.4% on the day post BABA results. The fund has a Zacks ETF Rank #3 with a Medium risk outlook.


ETFs Gain on Alibaba (BABA) Robust Earnings: Guggenheim China Technology ETF (CQQQ)

The Guggenheim China Technology ETF (NYSEARCA:CQQQ) targets the overall technology sector in China and follows the AlphaShares China Technology Index. Holding 75 stocks, Alibaba occupies the top position in the basket with 9.7% share.

The product manages an asset base of $407.3 million while trades in good volume of around 194,000 shares a day. Expense ratio comes in at 0.70%. CQQQ has added 0.4% on the day, following Alibaba’s results and carries a Zacks ETF Rank #2 with a High risk outlook.


ETFs Gain on Alibaba (BABA) Robust Earnings: Guggenheim BRIC ETF (EEB)

The Guggenheim BRIC ETF (NYSEARCA:EEB) provides exposure to BRIC countries and follows the BNY Mellon BRIC Select DR Index. In total, it holds 121 stocks with Alibaba at the top position, accounting for 9.9% of assets.

Information technology and energy takes the largest share from a sector look at 25.9% and 19.7%, respectively, while financials rounds off the next spot with a double-digit exposure. The ETF has $88.4 million in AUM and sees a light volume of around 15,000 shares.

Expense ratio comes in at 0.64%. The fund was up 0.2% on the day and has a Zacks ETF Rank #3 with a Medium risk outlook.


ETFs Gain on Alibaba (BABA) Robust Earnings: KraneShares CSI China Internet Fund (KWEB)

The KraneShares CSI China Internet Fund (NYSEARCA:KWEB) provides concentrated exposure to the China’s Internet market by tracking the CSI China Overseas Internet Index. In total, the fund holds 38 securities in its basket with Alibaba occupying the top spot at 8.9%.

The technology sector makes up for a substantial 63.6% of total assets, while consumer discretionary takes 29.5% share. The ETF has AUM of $1.5 billion and charges 72 bps in annual fees from investors. Volume is solid as it exchanges around 621,000 shares in hand per day.

KWEB rose 1.1% in the last trading session, following Alibaba’s earnings announcement, and currently has a Zacks ETF Rank #2 with a High risk outlook.

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