When Alibaba IPO Hits, These ETFs Are Likely Holders

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Alibaba, the world's largest online retailer, has enthralled investors with what could be the largest tech initial public offering in history, with an eye-popping market value of $150 billion to $250 billion.

It makes up about 80% of China's online shopping, with sales eclipsing bothAmazon.com ( AMZN ) and eBay ( EBAY ) combined at $38.5 billion, Chinese media reported.

Here's a look at five ETFs that will most likely pounce on the e-commerce juggernaut soon after it hits the stock market .

1. Renaissance IPO ETF ( IPO ) swoops up initial public offerings within the first 90 days of their stock market debut and sells them after two years.

It currently includes 61 companies, fronted byZoetis ( ZTS ),Facebook ( FB ) andWorkday (WDAY).

Launched in October 2013, it's tumbled 4% year to date, lagging theSPDR S&P 500 ETF Trust's (SPY) 2.4% return.PowerShares QQQ Trust (QQQ), tracking the 100 largest nonfinancial stocks on the Nasdaq, is nearly flat for the year.

2. First Trust U.S. IPO Index Fund (FPX), carries the 100 largest IPOs, ranked quarterly by market value. The major difference between FPX and IPO is that FPX holds stocks for four years.AbbVie (ABBV), Facebook andGeneral Motors (GM) top the roster. FPX is nearly flat this year.

3. KraneShares CSI China Internet ETF (KWEB) holds 28 Chinese companies engaged in online services and software stocks that are traded in the U.S. and Hong Kong. The biggest names are Tencent,Baidu (BIDU) andQihoo 360 Technology (QIHU). KWEB is down 2% year to date.

4. PowerShares Golden Dragon China Portfolio (PGJ) holds 78 U.S.-listed Chinese companies. With half of the portfolio dedicated to technology, many of its top holdings overlap with KWEB.

It's more diversified, with exposure to consumer staples, discretionary names, health care, telecom, energy and industrials. PGJ is down 7% year to date.

5. SPDR S&P Emerging Markets ETF (GMM) holds a whopping 865 U.S.-listed stocks from China, Russia, Brazil and other developing countries.

GMM is up 2% year to date.

As one the most promising IPOs this year, Alibaba is expected to raise $20 billion. But a stomach-churning drop this year in formerly high-flying tech stocks and their U.S. peers such as Amazon should give investors pause.

"You're in the market cycle in which momentum stocks are under pressure, and that generally doesn't bode as well for IPOs," said Duncan Rolph, managing director of Los Angeles-based Miracle Mile Advisors, which oversees $260 million in assets. "China has lagged the U.S., and there is real concern with China's growth rate and equities as a whole."

Neena Mishra, director of ETF research at Zacks Investment Research in Chicago, is bullish on China ETFs for long-term investors



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , ETFs

Referenced Stocks: AMZN , EBAY , IPO , ZTS , FB

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