Trip.com, an international travel agency headquartered in China, smashed domestic earnings expectations. It’s a reflection of China’s strong domestic consumer recovery that funds like the KraneShares CSI China Internet ETF (KWEB ) stand to benefit from.
The travel giant reported 124% revenue gains year-over-year explained Brendan Ahern, CIO of KraneShares, in the China Last Night blog. Given COVID lockdowns last year, strong gains are unsurprising but the amount by which Trip.com beat analyst expectations is noteworthy. The company reported 9.2 billion renminbi in revenue ($1.3 billion USD) on expectations of 8.05 billion.
Trip.com’s CFO Cindy Xiafan Wang reported that the company is “confident in the long-term outlook of the travel consumption in China. The demand for travel as part of the service consumption recovery is expected to keep increasing in China.”
Hotel reservations, transportation tickets, and corporate travel all demonstrated strong gains over pre-pandemic levels (2019). Hotel bookings were up 40% compared to 2019 levels and transportation ticket revenue was up 24%. Business travel revenue gained 61% quarter-over-quarter, 87% higher than pre-pandemic levels.
“The domestic China travel business is clearly back,” Ahern commented. While “limited outbound travel and inbound foreign tourists” constricts stronger gains, Ahern is hopeful that continued government communication will result in more transcontinental flights and travel.
KWEB Captures Domestic Travel Recovery in China
The KraneShares CSI China Internet ETF (KWEB ) tracks the CSI Overseas China Internet Index. The index measures the performance of publicly traded companies outside of mainland China that operate within China’s internet and internet-related sectors. Trip.com is a top 10 holding of the fund at 4.39% weight. The fund contains many of the tech giants likely to benefit from and drive economic recovery in China this year.
KWEB is currently closing in on both its 50-day Simple Moving Average and its 200-day SMA. Funds crossing above their SMAs is a signal to buy for trend followers and investors.
The fund includes companies that develop and market internet software and services. It also tracks companies that provide retail or commercial services via the internet, and develop and market mobile software. Companies that manufacture entertainment and educational software for home use are included as well.
KWEB provides exposure to the Chinese internet equivalents of Google, Facebook, Amazon, and eBay, all are companies that benefit from China’s growing user base and growing middle class. The fund worked to convert all possible share classes over to Hong Kong shares instead of ADRs to protect investors from risk.
The ETF carries an expense ratio of 0.70% and has $4.8 billion in AUM.
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