Yahoo Finance Should You Play Alibaba-Heavy ETFs Now?
Chinese tech giant Alibaba Group Holding Limited BABA jumped 5.4% in the key trading session on Jun 7 and also added 5.6% in the pre-market session on Jun 8. The stock was up 15.8% past month.
Investors should note that Chinese tech equities started rebounding from late April as the nation’s top political leaders planned to boost economic stimulus to promote growth. There could also be easing of the continued clampdown on tech firms. Names like Alibaba Group Holding Ltd. and JD.com Inc. started adding gains since then.
Most recently, Beijing announced plans to conclude its yearlong cyber security probe into DiDi Global. The news acted as a cornerstone for the entire Chinese tech industry, which has been suffering for long due to government crackdown.
China is becoming a world leader in advanced Information Technology hardware production, focusing on 5G equipment and semiconductors. Since the launch of the Shanghai and Shenzhen Stock Connect programs in 2014 and 2016, Mainland investors now represent 8.5% of Hong Kong's free-float market capitalization. This number is projected to increase significantly in the coming years, per KraneShares research.
In addition to that, China is easing lockdown restrictions after two months with Beijing and Shanghai reopening taking a speed. With this, supply chain scenario in the global semiconductor and tech space will be restored.
Alibaba’s latest earnings reports also came in upbeat. Alibaba’sfourth-quarter fiscal 2022 non-GAAP earnings of $1.25 per ADS (RMB 7.95) surpassed the Zacks Consensus Estimate by 17.9%. Notably, the figure decreased 23% year over year in RMB terms. Revenues of RMB 204.1 billion ($32.2 billion) improved 9% from the prior-year quarter. Further, the top line beat the Zacks Consensus Estimate of $30.5 billion.
Investors will try to cash in on the cheaper valuation of Alibaba too. The company’s forward P/E stands at 13.68X versus Internet – Commerce industry’s P/E of 25.28X and the S&P 500’s P/E of 18.34X. Beta of Alibaba is 0.91 versus the industry beta of 1.28 and the S&P 500 beta of 1.05. The Zacks Rank of the stock has a Zacks Rank #3 (Hold).
ETFs in Focus
While cues of a rebound in the Chinese tech sector may entice some investors in Alibaba investing, the basket approach appears to be safer. Basket or ETF approach minimizes the company-specific concentration risks. Below we highlight a few ETFs that have a considerable exposure to Alibaba.
ProShares Online Retail ETF ONLN – 13.16% exposure to Alibaba
Invesco BLDRS Emerging Markets 50 ADR Index Fund ADRE – 13.06% exposure to Alibaba
First Trust Dow Jones International Internet ETF FDNI – 10.32% exposure
MicroSectors FANG+ ETN FNGS – 9.55% exposure
Invesco Golden Dragon China ETF PGJ – 8.43% exposure
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Alibaba Group Holding Limited (BABA) : Free Stock Analysis Report
Invesco BLDRS Emerging Markets 50 ADR ETF (ADRE): ETF Research Reports
Invesco Golden Dragon China ETF (PGJ): ETF Research Reports
ProShares Online Retail ETF (ONLN): ETF Research Reports
MicroSectors FANG ETN (FNGS): ETF Research Reports
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