Economic policy concerns, trade wars, recession risks, and more plague U.S. markets. Meanwhile, in China, another round of policy support announcements and major earnings beats from China internet giants sent stocks surging in March. The KraneShares CSI China Internet ETF (KWEB ) provides exposure to the category and is up 29% year to date.
It’s no secret that China’s economy struggled to awaken from rigid COVID-19 lockdowns in recent years. A cratering real estate sector added to recovery woes as massive defaults and significant, unanticipated policy changes across a number of industries sent foreign investors packing in 2022 and 2023. Slower-than-anticipated GDP recovery in China and ratcheting U.S. and China tensions have left many investors sitting on the sidelines ever since.
That underweight could be costing investors now, as China’s tech giants soar on earnings beats and ongoing policy support. Tencent just posted 2024 fourth-quarter earnings, clocking a 90% rise in profits year-over-year and 11% revenue growth, reported CNBC. Tencent is one of the largest gaming companies in China, and has expanded its business to include several AI models. Meanwhile, Alibaba is up over 70% YTD, recently logging its highest market close since 2021, reported Barron’s.
China continues to issue a number of policies targeted at boosting consumer spending, e-commerce, and the stock market. The latest round — announced over the weekend — seeks to address rising unemployment, stabilize stock markets, and rally consumers. This includes intentions to “support the rapid development of new consumption… vigorously cultivate e-commerce… [and] promotion of new technologies,” KraneShares reported in the China Last Night blog.
Such policy support creates notable tailwind potential for companies like Tencent, Alibaba, Baidu, and more. In addition, boosting domestic consumer spending may help offset some of the impacts of the ongoing U.S.-China tariff war.
Capture China Internet Gains While Reducing ADR Risk With KWEB
KWEB measures the performance of publicly traded companies outside of mainland China that operate within China’s internet and internet-related sectors. It seeks to track the CSI Overseas China Internet Index. The index provides exposure to the China internet equivalents of Google, Facebook, Amazon, and eBay. It trades in securities on the Nasdaq Stock Market, the Hong Kong Stock Exchange, and the New York Stock Exchange.
See also: ETF of the Week: KWEB
KWEB is up 28.97% on a price return basis YTD, as of March 19, 2025, according to Y-Charts data. U.S. tech equities, measured using the Invesco QQQ Trust Series 1 (QQQ), were down 6.30% YTD over the same period. In the last 12 months, KWEB was up 42.18%, while QQQ rose 9.49%.
Top holdings within KWEB include Alibaba at a 12.43% weight, Tencent at 10.78%, and PDD Holdings at 6.92%, as of March 18, 2025. In the last two years, the fund has also worked to convert all possible share classes to Hong Kong shares. It’s a calculated move away from ADRs to protect investors from added risk. Currently, 65% of assets held by KWEB are listed in Hong Kong, while 33.4% are listed on U.S. exchanges.
KWEB carries an expense ratio of 0.70%.
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