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An ETF Play for a Google-Free China

Stocks in this article: GOOG BIDU SOHU

NEW YORK ( TheStreet) -- With tensions coming to a boil in the dispute between Google (GOOG) and China, ETF investors may find a China Technology ETF to be a good way to play the domestic firms that will benefit in the absence of the search giant.

This week, the battle between Google and China escalated to a new level. Although it was previously rhetorical, the search giant took action on Monday in an attempt to override the Chinese government's ability to censor its search results.

Web surfers looking to search Google's China homepage,, were forwarded to the uncensored Hong Kong landing page, . By Tuesday, however, the government managed to continue to block China's 390 million Internet users from searching controversial topics such as Tiananmen Square.

In light of Google's action, a number of the company's partners, including telecom giants, are mulling the possibility of pulling out of their respective deals with the search giant. Even Hong Kong billionaire, Li Ka-shing, has gotten involved in the dispute, dropping Google as the main search engine for his Tom Online Website.

Since the conflict between these two titans came to a boil at the beginning of January, investors looked to domestic Chinese Internet companies including Baidu (BIDU), Sohu (SOHU), and NetEase (NTES) to benefit from Google's absence.

Sure enough, Baidu, China's dominant search engine company, has seen impressive gains throughout the ordeal. Year to date through March 23, Google shares have dipped 11% while shares of BIDU have gained 44%. Sohu has fallen 5%, and NetEase has gained 3%.

Given the excitement surrounding these Internet companies, now may be an ideal time for investors to pay attention to the dominant China tech ETF on the market.

Although ETF investors looking for access to China have traditionally been directed toward large-cap instruments such as iShares FTSE/Xinhua China 25 Index Fund (FXI) or small-cap funds like the Claymore/AlphaShares China Small Cap ETF (HAO), a number of new China funds have provided investors with sector exposure to the country, including tech.

Currently, there are two Chinese technology ETFs: the Claymore/AlphaShares China Technology ETF (CQQQ) and the GlobalX China Technology ETF (CHIB). Although both provide ample exposure to a broad array of tech firms including Baidu and Sohu, their performance throughout 2010 has diverged considerably. Investors holding GlobalX's CHIB fund have seen considerable underperformance. Year to date through March 23, CHIB has gained 2% while CQQQ has gained 6%.

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