This ETF Is Loving Alibaba's Meteoric Rise

Alibaba Group Holding Limited BABA is one of the best-performing large-cap stocks in the U.S. this year. Shares of China's largest e-commerce company are in the midst of a stunning ascent, up almost 92 percent year to date. By comparison, Alibaba's U.S. rival, Amazon.com Inc. AMZN is up “just” 28 percent this year.

Alibaba's rise is punishing traders that have been bold enough to short the high-flying stock. As Benzinga reported last week, short sellers in Alibaba are now down $2 billion this year. 

“Alibaba has more than twice the short interest of any other stock in the market, according to financial analytics firm S3 Partners,” Benzinga reported.

Good News For ETFs

Predictably, Alibaba's surge is benefiting an array of exchange-traded funds. While some of the most popular diversified emerging markets ETFs feature exposure to Alibaba and other familiar Chinese Internet stocks, those funds do so with often nominal weights. Conversely, investors can find significant Alibaba exposure in more focused ETFs.

That includes the Guggenheim China Technology ETF CQQQ. Approximately 30 ETFs feature Alibaba exposure, but CQQQ offers credibility as an “Alibaba ETF.” As of Aug. 18, the ETF allocated 11.6 percent of its weight to Alibaba, making the stock the fund's second-largest holding at that time behind Tencent Holdings Ltd. TCEHY.

CQQQ tracks the AlphaShares China Technology Index. That index “is designed to measure and monitor the performance of publicly issued common equity securities of publicly traded companies that are open to foreign ownership and derive a majority of their revenues from the information technology sector (as defined by Standard & Poor’s Global Industry Classification Standard) in China or the Special Administrative Regions of China, such as Hong Kong and Macau,” according to Guggenheim.

About That Weight

Not surprisingly, CQQQ's Alibaba allocation is paying off as the ETF is up about 55 percent year to date. Additionally, CQQQ was one of just six ETFs to hit an all-time high on Monday.

Investors are starting to appreciate CQQQ. The ETF turns in eight in December and has been much of its more than seven years on the market toiling in relative anonymity. That is changing this year as CQQQ has added nearly $81 million of its $160.7 million in assets under management since the start of 2017.

Over the past three years, CQQQ is up 43 percent compared to gain of around 9 percent for the largest U.S.-listed China ETF.

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