China’s economy is rebounding as its central bank enacts a policy of monetary easing that is seeing reductions in loan requirements and other regulations that are adding liquidity. As China continues to recover from its recent round of COVID-19 lockdowns, growth stocks and the internet giants are gaining once more, and advisors and investors are taking note.
Both Hong Kong and China have outperformed this week, with foreign investors buying over $600 million in Mainland China stocks for the week, reported KraneShares in the China Last Night blog. Internet stocks, in particular, were performing strongly, with Alibaba HK gaining 5.46%, Tencent gaining 2.45%, and Meituan gaining 2.86% in overnight trading.
“I think China’s strong performance could become very uncomfortable for managers underweight the space as we head into quarter-end,” wrote KraneShares.
The KraneShares CSI China Internet ETF (KWEB ) tracks the CSI Overseas China Internet Index and measures the performance of publicly-traded companies outside of mainland China that operate within China’s internet and internet-related sectors. Alibaba is carried at a 9.78% weight within the fund, Tencent at a 9.80% weight, and Meituan at a 7.54% weight.
Since June 1, KWEB has seen inflows of $796.45 million as advisors and investors seek to capture the rebound happening within the space, with many of the holdings contained in KWEB continuing to trade at levels that are less than half of the multiples of their U.S. counterparts.
KWEB invests in companies that develop and market internet software and services, provide retail or commercial services via the internet, develop and market mobile software, and manufacture entertainment and educational software for home use.
KWEB provides exposure to the Chinese internet equivalents of Google, Facebook, Amazon, eBay, and the like, all companies that benefit from a growing user base within China, as well as a growing middle class. The fund has worked to convert all possible share classes over to Hong Kong shares instead of ADRs to protect investors in case of Chinese delistings within U.S. markets.
The ETF has an annual expense ratio of 0.70% and has over $7.8 billion in AUM.
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