Internet Stocks Losing Charm?

internet etfsIs the craze for social media evaporating across the globe? At least, the poor performance by Global X Social Media Index ETF (NASDAQ:SOCL) this year is giving such cues. In the year-to-date period, SOCL was off about 9.50% with the last one month being hardest hit when SOCL slumped more than 15%.

The reasons for this slide boils down to the social media sell-off in China as well as acute selling pressure witnessed in some of SOCL’s top holdings, like Facebook (NASDAQ:FB) and Twitter (NYSE:TWTR).

Investors should note that SOCL has about half of its focus on the U.S., 25% of exposure in China and the remaining portfolio in the rest of the world. This clearly points to why any movement in the U.S. and China can make or break this social media ETF. Let’s delve into the matter in greater detail below:

What Happened in China?

Internet censorship has always been severe in China, resulting in a ban on some renowned social networking websites like FB, TWTR, YouTube, and FourSquare. These sites were identified as risks to state-controlled media. However, this is an old story.

The latest hazard was a possible bursting of the tech bubble in the U.S. in March which spilled over into the Asian tech sell-off as well. The Chinese Internet ETF has seen a spectacular run with CSI China Internet ETF (KWEB) gaining as much as 21% in the first two months of the year.

Though overall China ETFs started the year with sluggish trading, two other tech ETFs like Guggenheim China Technology ETF (CQQQ) and Global X China Technology ETF (QQQC) returned about 10.0%.

This splendid run-up had to end at some point as the Chinese Internet market was due for a correction. As a result, the largest holding of SOCL – Tencent – which accounts for about 13.08% of the basket, was down more than 17% since the beginning of February.

Its market capitalization plunged to $126 billion from $152 billion. Another Chinese company SINA Corp (SINA) – occupying 7.41% share of SOCL – tumbled 11.4% in the last one month (China Internet ETF: The Best Choice in the Space?).

Internet Stocks Losing Charm? 

Russian Internet Company Yandex – accounting for 4% of SOCL’s share – lost about 11.2%, and the situation back home was even more vexing.

FB – having more than 12% share of SOCL – gave up 13.5% in price,LinkedIn (NYSE:LNKD) having more than 8% share shed 12.8%, Zynga (NASDAQ:ZNGA) making up 5.5% of SOCL plummeted 26.6%, Yelp (YELP) contributor of 5.29% of the fund’s total assets plunged 28%, and TWTR having more than 4.5% focus slipped 19% over the past month.

(...)Click here to continue reading the original article: Internet Stocks Losing Charm? [Facebook Inc, Twitter Inc, LinkedIn Corp, Zynga Inc, SINA Corp]

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