Alibaba IPO’s Huge ETF Conundrum

September 15, 2014

The key is to scope out ETFs that allow the inclusion of China “N-shares.” With regard to major global indices, that means sniffing out ETFs based on S&P emerging markets indexes, since the S&P BMI indexes include N-shares.

Immediately coming to mind within the China space is the $983 million SPDR S&P China ETF (GXC | B-43) and the PowerShares Golden Dragon China ETF (PGJ | A-23). GXC is a comprehensive “offshore” China ETF, while PGJ is only eligible to hold U.S.-listed N-shares.

For those looking for quick access to Alibaba in a China-specific fund, your best bet will probably be the KraneShares CSI China Internet ETF (KWEB | B-23), which just surpassed the $100 million in assets mark. According to KraneShares’ website, Alibaba could be added to KWEB as soon as 11 days after its IPO.

I’ve put together the three largest emerging market ETFs and the three largest China ETFs that should be, and likely won’t be, eligible to include Alibaba:

Top 3 Eligible EM ETFs AUM ($M)
*ECON - EGShares EM Consumer 1,330
**FEM - First Trust EM AlphaDex 468
*Depending on classification outcome
**Depending on AlphaDex methodology


Top 3 Ineligible EM ETFs AUM ($M)
VWO - Vanguard FTSE EM 50,290
EEM - iShares MSCI EM 43,920
IEMG - iShares Core MSCI EM 5,610


Top 3 Eligible China ETFs AUM ($M)
GXC - SPDR S&P China 983
PGJ - PowerShares Golden Dragon China 310
KWEB - KraneShares CSI China Internet 103


Top 3 Ineligible China ETFs AUM ($M)
FXI - iShares China Large Cap 5,940
MCHI - iShares MSCI China 1,160
ASHR - DBX Harvest CSI 300 China A-Shares 434











Note: This should only be used as a guide, as methodologies can change in the coming months.


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