Breaking News
Investing Pro 0
Free Webinar - The Role of Psychology in Trading - Thursday, December 8, 2022 | 04:00PM EST Enroll Now

Think Chinese Internet Stocks Will Recover? Consider Buying This ETF

By Investing.com (Tezcan Gecgil/Investing.com )ETFsMay 17, 2022 09:26AM ET
www.investing.com/analysis/think-chinese-internet-stocks-will-recover-consider-buying-this-etf-200624315
Think Chinese Internet Stocks Will Recover? Consider Buying This ETF
By Investing.com (Tezcan Gecgil/Investing.com )   |  May 17, 2022 09:26AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
 
WB
-5.15%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
RAYC
+0.15%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
MPNGY
-1.72%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
CHB
+0.16%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
FLCH
-1.72%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
H11137
-3.96%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 

China is the world’s most populous nation with a vastly expanding urban middle class. It is also the world’s second largest economy, after the US. Therefore, growth investors keep a close eye on many Chinese shares.

Due to state interference, equity markets in China have been facing severe hiccups over the past year. Meanwhile, as part of the “Holding Foreign Companies Accountable Act (HFCAA),” many Chinese companies face delisting in the US.

In addition, supply chain disruptions due to the ongoing COVID-19 shutdowns and the likelihood of an economic slowdown have added to investors’ worries. For instance, recent metrics show that retail sales declined over 11% year-on-year. In early May, Fitch Ratings also cut the expected GDP growth for the year.

As a result, Chinese stocks have come under extended pressure. Since January, the two benchmark indices, the Shenzhen CSI 300 and the Shanghai Composite Index, have lost 19.9% and 15.5%. By comparison, the S&P 500 and the Dow Jones Industrial Average have declined 15.9% and 11.3% so far this year.

Many analysts remain bullish on Chinese tech stocks despite these headwinds, thanks to solid cash flows and enticing double-digit growth prospects. Meanwhile, Chinese President Xi Jinping announced a leadership pledge to:

“support the healthy development of tech platform companies.”

Examples of China ETFs

There are currently dozens of exchange-traded funds (ETFs) that give broad access to Chinese equities:

  • Franklin FTSE China ETF (NYSE:FLCH) - 22.1% year-to-date (YTD);
  • Global X China Biotech Innovation ETF (NASDAQ:CHB) - 32.0%;
  • Global X MSCI China Consumer Disc ETF (NYSE:CHIQ) - 28.0%;
  • iShares MSCI China ETF (NASDAQ:MCHI) - 22.7%;
  • Invesco Golden Dragon China ETF (NASDAQ:PGJ) - 29.3%;
  • Rayliant Quantamental China Equity ETF (NYSE:RAYC) - 24.7%;
  • SPDR S&P China ETF (NYSE:GXC) - 22.0%;

As these metrics show, 2022 has been a tough year for long-term China bulls. Today’s article focuses on Chinese internet shares and an ETF that invests in them.

Chinese Internet Stocks

With over 1 billion internet users, China is the world’s largest internet market. Thus, it’s no surprise to see investors’ interest in Chinese online stocks, especially e-commerce ones.

InvestingPro website provides access to Chinese internet stocks that can appeal to long-term investors. For instance, among the large-capitalization (cap) ones are the e-commerce icons Alibaba (NYSE:BABA) and JD.com (NASDAQ:JD); online gaming giant NetEase (NASDAQ:NTES); internet search as well as AI behemoth Baidu (NASDAQ:BIDU); social media platform Weibo (NASDAQ:WB); online discount retailer Vipshop (NYSE:VIPS); and Autohome (NYSE:ATHM).

Meanwhile, the fastest-growing Chinese internet stocks include the social platform JOYY (NASDAQ:YY); Weibo; Alibaba Group Holding; JD.com; and NetEase.

Those investors looking for undervalued Chinese internet stocks may want to research Weibo; Autohome; Baidu; Vipshop; Alibaba; and travel group Tuniu (NASDAQ:TOUR).

Several stocks currently trade at relatively low price-to-book (P/B) ratios. Examples include Tuniu; media and gaming company Sohu.com (NASDAQ:SOHU); JOYY; online entertainment name Hello Group (NASDAQ:MOMO); and e-commerce services provider Baozun (NASDAQ:BZUN).

Finally, investors who pay attention to analyst price targets may be interested to know that several Chinese internet stocks could see significant upsides from current price levels. Alibaba, Baidu, Sohu.com, Weibo, JOYY, and JD.com are among those shares.

Understandably, picking stocks that best serve individual portfolio objectives requires serious due diligence. Thus, retail investors could find it more convenient to invest in an ETF that provides thematic access to the emerging Chinese internet industry.

KraneShares CSI China Internet ETF

  • Current Price: $26.68
  • 52-week range: $20.41 - $73.54
  • Expense ratio: 0.70% per year

The KraneShares CSI China Internet ETF (NYSE:KWEB) invests in Chinese internet companies listed overseas, mainly in the US as well as Hong Kong (HK). It tracks the CSI Overseas China Internet Index.

KWEB Weekly Chart
KWEB Weekly Chart

KWEB, which was launched in July 2013, currently holds 47 stocks. In terms of sectoral allocations, we see consumer discretionary (43.7%), communication services (41.8%), and industrials (4.1%), among others.

In 2022, the ETF changed the weightings for listing locations to mitigate the potential impact of the HFCAA legislation and delisting in the US. Now, more than two-thirds of the shares are listed in Hong Kong (HK). Next come US-listed Chinese companies (26.2%). And finally, over 5% of the names are likely to have a Hong Kong listing soon.

The top 10 holdings make up almost two-thirds of $5.4 billion in net assets. Among those are Tencent (OTC:TCEHY), which owns a range of businesses in gaming, social media and fintech; Alibaba; JD.com; Baidu; and on-demand delivery name Meituan (OTC:MPNGY).

KWEB saw a record high on June 1, 2021. But what a difference a year has made. Since January, the fund has shed 26.8% and 61% over the past 12 months. It hit a 52-week low on Mar. 15.

Long-term investors looking to generate returns from the rising domestic consumption habits of China’s growing middle class should consider researching the fund further. Most potentially, harmful news is likely to have been priced in the KWEB ETF.

Think Chinese Internet Stocks Will Recover? Consider Buying This ETF
 

Related Articles

Tim Knight
ETF Focus: Commodities By Tim Knight - Nov 13, 2022 1

Let’s look at a few commodity ETFs together. In general, they have remained in an uptrend for two years. This channel needs to break in order for commodities to start a downtrend,...

Think Chinese Internet Stocks Will Recover? Consider Buying This ETF

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email