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U.S. Tech ETFs Extend Leads Over China Rivals

This article was originally published on ETFTrends.com.

Shares of Chinese technology giant Tencent Ltd. (TCEHY) recently slumped, weighing on a slew of China technology exchange traded funds in the process. That is helping domestic technology ETFs, such as the PowerShares QQQ (QQQ) , which tracks the tech-heavy Nasdaq-100 Index, extend leads over their China-focused rivals.

The Invesco China Technology ETF (CQQQ) is lower by 17.57% over the past month. During the same period, is off just 0.58%.

“Seven U.S.-listed ETFs with at least $200 million in assets and a 13 percent cumulative weighting toward Baidu, Alibaba and Tencent are down double digits this year,” according to Bloomberg.

For its part, QQQ is dominated by the US-based FAANG stocks, among others. However, with technology’s ascent and that of QQQ, come concerns that the Nasdaq-100 is too heavily exposed to a small number of stocks. Additionally, some analysts opine that the benchmark’s significant technology overweight leaves it vulnerable should tech stocks fall out of favor. Due to tech’s ascent this year, QQQ’s exposure to the sector has increased while its consumer discretionary weight has been mostly steady.

A Big Lead for QQQ

“Meanwhile, funds with disproportionate exposure to the FANG stocks are up big in 2018 despite also getting knocked on Wednesday. The Invesco QQQ Trust Series 1, which tracks the Nasdaq 100 Index, saw its year-to-date outperformance of the Invesco China Technology ETF swell to nearly 40 percentage points,” reports Bloomberg.

Related: Howard Marks Blames ETFs for Overpriced FANG Stocks

China’s most successful internet companies, like Tencent, Alibaba and Baidu, among others, are listed abroad on foreign exchanges like the New York Stock Exchange or Hong Kong Stock Exchange. These companies first chose to list on foreign exchanges in an attempt to gain more widespread recognition back when Beijing was limiting foreign exposure to Chinese A-shares.

“Fund managers surveyed by Bank of America Merrill Lynch in August judged long positions in U.S. and Chinese tech behemoths to be the most crowded trade for the seventh month running. Tech industry leaders in each of the world’s two largest economies are considered structural growth stories, with near monopolistic characteristics in some cases,” according to Bloomberg.

For more news and strategy on the Technology market, visit our Technology category .

Tom Lydon’s clients own shares of QQQ.

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