Tumbling Internet Shares Forcing One China ETF Lower

Shares of the PowerShares Golden Dragon China Portfolio PGJ are off 2.7 percent today despite strong moves in other China ETFs and it looks like weakness in Chinese Internet is to blame. Shares of Baidu BIDU, PGJ's second-largest holding with a weight of 6.73 percent, are off 6.2 percent on volume that is close to double the daily average. The decline in Baidu, often referred to as the Google GOOG of China, may have been prompted by an Investor's Business Daily piece that said Qihoo 360 QIHU is gaining share in the Chinese Internet search market. However, that piece notes Qihoo's increased market share has come at the expense of Google and that since Qihoo launched its search engine in August, Baidu has also boosted its share of China's Internet search market. Qihoo is off nearly three percent today on volume that is close to double the daily average. That stock is PGJ's tenth-largest holding with a weight of nearly four percent. The weakness in the Internet search names has permeated China's Internet sector, punishing PGJ in the process. Shares of Sina SINA, whose Weibo service is known as China's equivalent of Twitter, are off more than eight percent today and have touched a new 52-week low. On double the average daily turnover, NetEase NTES, the maker of online games, is off 4.5 percent. Sina and NetEase combine for 11.5 percent of PGJ's weight. The weakness has even made its way to travel names as Ctrip.com CTRP is plunging 10 percent on above average volume. The online travel reservations firm is another PGJ top-10 holding, accounting for 4.72 percent of the ETF's weight. PGJ's Tuesday woes stand in stark contrast to other major China ETFs. For example, the iShares FTSE China 25 Index Fund FXI, the largest China ETF by assets, is up more than one percent. FXI has no exposure to Chinese technology or Internet names. The iShares MSCI China Index Fund MCHI holds 138 stocks compared to just 26 for FXI,, but MCHI's technology and Internet exposure is minimal. That has helped the FXI alternative gain nearly one percent today. The Guggenheim China Small-Cap ETF HAO, which features a 6.53 percent allocation to technology names, is also modestly higher today. For more on ETFs, click here.