U.S. tariffs went into effect today, with a 25% tariff on Canadian goods and a month pause on tariffs on Mexico. Meanwhile a smaller 10% tariff on China caused Hong Kong markets to temporarily fall before recovering on AI and semiconductor stock outperformance.
KraneShares highlighted the overnight winners in the China Last Night blog. The Hang Seng Tech and Hang Seng Indexes opened down 3.20% and 2.28% respectively on tariff enactment. Mainland China markets remained closed on holiday. However, the Hong Kong indexes reversed to close up 0.29% for the Tech Index while the broader Hang Seng trimmed losses to 0.04%. Kingsoft Cloud soared to close the day up 31.43% while Semiconductor Manufacturing International (SMIC) rose 10.26%. Meanwhile Alibaba climbed 6.46% in trading.
The smaller tariffs on Chinese goods compared to those leveraged on U.S. neighbors is worth noting, according to KraneShares. The firm suggested that “one might speculate that US-China trade talks are occurring though the market reaction seems to be an example of shooting first and asking questions later”.
KTEC Holds Steady as Tariffs Begin
The recent volatility and disruption within the AI ecosystem caused by DeepSeek resulted in Chinese tech companies outperforming their U.S. counterparts YTD. The KraneShares Hang Seng TECH Index ETF (KTEC ) is up 8.23% YTD on a price returns basis as of February 3, 2025. The KraneShares CSI China Internet ETF (KWEB ) gained 5.71% YTD. In comparison, the Invesco QQQ Trust, Series 1 (QQQ ) rose marginally at 1.33% over the same period.
Investors seeking differentiated AI opportunity would do well to consider KTEC. The fund offers exposure to Hong Kong internet stocks and currently sits in solid buy territory. It trends above both its 50-day and 200-day Simple Moving Average, a buy signal for trend followers. It also tracks e-commerce companies, fintech firms, and other tech-related companies. KTEC seeks to track the Hang Seng TECH Index which includes the 30 technology companies in Hong Kong’s burgeoning tech sector. The companies hold the highest free-float market capitalization in their respective categories.
The fund invests mainly in China H shares. These shares are incorporated in mainland China and trade on the Hong Kong Stock Exchange.
KTEC carries an expense ratio of 0.69%.
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