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China’s JD.com reported earnings today, and while the e-commerce giant was hit by COVID-19 slowdowns in China, as reflected in a slowed revenue growth, it beat revenue expectations and was trading up this morning, reported CNBC.
The Chinese company experienced its slowest-ever revenue growth over a single quarter, coming in at 18% in the first part of 2022 as Shanghai lockdowns heavily impacted the broad economy and retail sales. Revenue was 239.7 billion Chinese yuan (approximately $37.8 billion) in Q1 of 2022, beating expectations of 236.6 billion yuan.
Shares of JD.com were trading up 8% in U.S. markets after the earnings report.
“JD.com’s robust supply chain capabilities and technology-driven operating efficiency underpinned our solid performance during the quarter as we continued to deliver healthy growth amidst a challenging external environment,” Xu Lei, CEO of JD.com said in the press release.
The internet sector could be poised for an upswing, with the attendance of Vice Premier Lie He at the CPPCC’s (Chinese People’s Political Consultative Conference) meeting together with internet companies today seen as a potentially favorable portent, wrote KraneShares in the China Last Night blog. The meeting, called “Promoting the Sustainable and Healthy Development of the Digital Economy,” could potentially provide further guidance on the ending of internet regulation in China.
JPMorgan also lifted its expectations for the China tech sector, raising both price targets and outlook yesterday.
In China, the largest, most traded stocks on the Hong Kong Exchange were Tencent (5.26), Meituan (6.24%), Alibaba HK (7.03%), JD.com HK (7.4%), and Kuaishou (+4.97%).
Capturing the Potential Recovery of China's Internet Sector
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.
This includes 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.
The fund has seen inflows between May 12–16 of $171 million as advisors and investors have sought exposure, 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 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 ETF has an annual expense ratio of 0.70% and has nearly $5.5 billion in AUM.
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