China is the most populous country in the world, with a growing urban middle class. It is also the second largest economy in the world, after the United States. That is why growing investors are watching many Chinese stocks closely.
Due to state interference, Chinese stock markets have faced severe disruptions over the past year. Meanwhile, according to the Foreign Corporate Responsibility Act (HFCAA), many Chinese companies are at risk of being withheld in the United States.
In addition, supply chain disruptions due to ongoing COVID-19 closures and the likelihood of an economic downturn have added to investor concerns. For example, recent {{news-2825147 || metrics} show that they are down more than 11% year-on-year. In early May, the rating agency Fitch Ratings also cut its GDP growth forecast for the year.
As a result, Chinese stocks came under prolonged pressure. Since January, the two reference indices, the and the, have lost 19.9% and 15.5%. In comparison, it has fallen by 15.9% and 11.3% since the beginning of the year.
Many analysts remain optimistic about Chinese technology stocks despite these headwinds, thanks to strong cash flow and attractive double-digit growth prospects. Meanwhile, Chinese President Xi Jinping announced the commitment of his leaders
“Supporting the Healthy Development of Technology Platform Companies”.
Examples of China ETFs
There are currently dozens of exchange traded funds (ETFs) that offer broad access to Chinese equities:
- Franklin FTSE China ETF (NYSE 🙂 down 22.1% YTD (YTD);
- Global X China Biotech Innovation ETF (NASDAQ 🙂 – 32.0%;
- Global X MSCI China Consumer Disc ETF (NYSE 🙂 – 28.0%;
- iShares MSCI China ETF (NASDAQ 🙂 – 22.7%;
- Invesco Golden Dragon China ETF (NASDAQ 🙂 – 29.3%;
- Rayliant Quantamental China Equity ETF (NYSE 🙂 – 24.7%;
- SPDR S&P China ETF (NYSE 🙂 – 22.0%;
As these metrics show, 2022 has been a tough year for China’s long-term followers. Today’s article focuses on Chinese Internet stocks and an ETF that invests in those stocks.
Chinese Internet stocks
With more than a billion Internet users, China is the world’s largest Internet marketplace. Therefore, it is not uncommon to see investor interest in Chinese online stocks, especially those of e-commerce.
the The InvestingPro website provides access to Chinese Internet stocks that can attract long-term investors. For example, capital letters include the e-commerce icons Alibaba (NYSE 🙂 and JD. com (NASDAQ :), the online gaming giant NetEase (NASDAQ :), the Internet search and intelligence giant Baidu (NASDAQ:); the social networking platform Weibo (NASDAQ :); Vipshop (NYSE 🙂 online discount retailer; and Autohome (NYSE :).
As for the fastest growing Chinese Internet stocks, they include the social platform JOYY (NASDAQ :), Weibo, Alibaba Group Holding, JD.com and NetEase.
Investors looking for undervalued Chinese Internet stocks may be interested in Weibo, Autohome, Baidu, Vipshop, Alibaba and the Tuniu Travel Group (NASDAQ :).
Currently, several stocks are trading at relatively low price / account (P / B) ratios. This is the case with Tuniu, the media and gaming company Sohu.com (NASDAQ :), JOYY, Hello Group (NASDAQ :), an online entertainment company, and Baozun (NASDAQ :), a trade services provider electronic.
Finally, investors paying attention to analysts ’price targets may be interested to know that various Chinese stocks on the Internet could experience significant gains with current price levels. Alibaba, Baidu, Sohu.com, Weibo, JOYY and JD.com are among those stocks.
Needless to say, choosing the stocks that best meet the goals of the individual portfolios requires due diligence. Thus, retail investors may find it more convenient to invest in an ETF that offers thematic access to the emerging Chinese Internet industry.
KraneShares CSI China Internet ETF
- Prevailing price: $ 26.68
- 52-week interval: $ 20.41 – $ 73.54
- Expenditure ratio: 0.70% per year
The KraneShares CSI China Internet ETF (NYSE 🙂 invests in Chinese Internet companies listed abroad, mainly in the United States and Hong Kong (HK). Follow the index.
KWEB, which was launched in July 2013, currently has 47 shares. In terms of sectoral allocations, discretionary consumption (43.7%), communication services (41.8%) and industry (4.1%) stand out.
In 2022, the ETF changed the weighting of listing positions to mitigate the potential impact of HFCAA legislation and the withdrawal of listing in the US. More than two-thirds of the shares are now listed on Hong Kong (HK). Next are Chinese companies listed in the United States (26.2%). And finally, more than 5% of the names are likely to appear in Hong Kong soon.
The top 10 holdings account for nearly two-thirds of the $ 5.4 billion in net assets. Among them are Tencent (OTC :), which owns a number of gaming, social media and fintech companies, Alibaba, JD.com, Baidu and the on-demand delivery name Meituan (OTC :).
KWEB reached an all-time high on June 1, 2021. But what a difference in one year! Since January, the fund has lost 26.8% and 61% in the last 12 months. It reached a 52-week low on March 15.
Long-term investors looking to generate returns from rising domestic consumption habits of China’s growing middle class should consider further researching this fund. It is very likely that the KWEB ETF has rated the negative news.