3 Hot China ETFs for Singles Day
Chinese and single make a perfect combination for a shopping day out on November 11. This is country’s Singles Day, when e-commerce players make quick bucks with heavy discounts and promotions to lure solitary souls.
Also known as anti-Valentine's Day, the date 11.11 depicts those who are single. The young Chinese binge on this popular occasion making it the busiest online shopping day. Last year, online sales hit $8 billion in China on Singles Day, outpacing the combined sales of $3 billion in U.S. on Black Friday and Cyber Monday, according to the Boston Consulting Group. This year too is expected to be no exception, with many market researchers predicting another record level of online purchase.
Clothing and accessories, cosmetics and personal care, household products, home electrical appliances as well as food and beverages are the most popular categories that generally enjoy higher sales in this online shopping festival.
Singles Day: A Revenue Booster
Chinese e-commerce giant Alibaba Group (BABA) turned into the biggest 24-hour cyber spending blitz worldwide five years ago (read: Alibaba Investors Cheer Revenue Growth, ETFs to Benefit).
BABA sales also rose from $3.1 billion in 2012 to $5.8 billion in 2013 on this day and are projected to cross $8 billion this year by virtue of the growing awareness on Internet shopping and the event in particular. In fact, Alibaba revealed that more than $6 billion of goods have already sold on its website within 15 hours of the 11/11 shopping festival, marking an all-time high. Sales hit $1 billion in just less than 18 minutes at the start of the event.
Other e-commerce firms like JD.com (JD), Baidu (BIDU), Jumei International (JMEI) and Vipshop Holdings (VIPS) also offer huge discounts and expect a high sales volume on the day. Orders on JD jumped 140% from the year-ago period in the first 10 hours. China's Xiaomi Technology, the world's third-largest smartphone maker, clocked RMB 100 million ($16 million) in just five minutes of the start of the event and RMB 1 billion ($163 million) within 12 hours.
Courier services are also expected to rise with the surge in e-commerce business, thereby benefitting logistics giants such as SF Express, STO, and YTO.
How to Play
E-commerce players are enjoying a huge rally on the Singles Day shopping fervor. Alibaba and Vipshop climbed over 4% each and reached a 52-week high of $119.45 and $24.63, respectively. Shares of JD.com, Jumei and BIDU rose 6.14%, 5.28% and 4.67%, respectively in yesterday’s trading session (read: China Internet ETF: The Best Choice in the Space?).
This trend is likely to continue and investors seeking to tap “Single Day” benefits in a diversified way should focus on the following three ETFs that provide substantial exposure to the Chine e-commerce or the retail segment.
KraneShares CSI China Internet Fund (KWEB)
This product provides concentrated exposure to the Chinese Internet market by tracking the CSI China Overseas Internet Index. In total, the fund holds 44 securities in its basket with a large concentration on the top firm – Alibaba - at 12.1%, closely followed by Tencet Holdings (TCEHY) and BIDU at 8.8% and 8.3%, respectively. Other firms hold less than 6.6% of assets.
The ETF has amassed $138.6 million in AUM and charges 68 bps in annual fees from investors. Volume is moderate as it exchanges 81,000 shares in hand per day. The product gained over 3% in yesterday trading session.
Guggenheim China Technology ETF (CQQQ)
This fund target the overall technology sector in China and follows the AlphaShares China Technology Index, holding 57 stocks in its basket. BIDU and TCEHY occupy the top two positions in the fund’s portfolio with double-digit exposure while other firms hold less than 7.75% share (read: Tap into China's Technology Potential with These ETFs).
In terms of industrial exposure, about half of the portfolio is allotted to Internet mobile applications while semiconductors and electronic components round off to the next two spots with double-digit exposure. The product manages an asset base of $72 million while trades in a small volume of around 21,000 shares a day. Expense ratio came in at 0.70%. CQQQ added 0.5% yesterday and has a Zacks ETF Rank of 3 or ‘Hold’ rating with High risk outlook.
Global X China Consumer ETF (CHIQ)
This product offers exposure to the consumer sector in China by tracking the Solactive China Consumer Index. Holding 41 securities in its basket, it is pretty spread out across each component as none of these holds more than 5.67% share. Vipshop, Great Wall Motor and Belle International Holdings are the top three firms in the basket.
In terms of industrial exposure, the ETF is also well diversified across packaged food products, automobile manufacturing, specialty retail, and Internet retail that make up for a combined 57% of CHIQ. The fund has a decent level of $313.7 million in AUM and about 55,000 in average daily volume. It charges 65 bps in annual fees and expenses and added 0.4% in yesterday’s trading session. The product has a Zacks ETF Rank of 3 with a High risk outlook.
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