China is the world’s most populous country with a growing urban middle class. It is also the world’s second largest economy, after the United States. Growth investors are therefore closely monitoring many Chinese stocks.
China’s stock markets have faced severe hiccups over the past year due to state intervention. Meanwhile, under the Holding Foreign Companies Accountable Act (HFCAA), many Chinese companies are facing remove from list In the United States.
In addition, supply chain disruptions due to ongoing COVID-19 outages and the likelihood of an economic slowdown have contributed to investor concerns. For example, recent show that they fell by more than 11% year on year. At the beginning of May, Fitch Ratings also reduced the expected GDP growth for the year.
As a result, Chinese stocks have come under long-term pressure. Since January, two benchmarks, the and , lost 19.9% and 15.5%. For comparison, and so far this year they have fallen by 15.9% and 11.3%.
Many analysts remain optimistic about China’s technology stocks despite these headwinds, thanks to solid cash flows and attractive double-digit growth prospects. Meanwhile, Chinese President Xi Jinping announced leadership promise:
“Support the healthy development of companies with technology platforms.”
Examples of Chinese ETFs
There are currently dozens of exchange traded funds (ETFs) that provide broad access to Chinese equities:
- Franklin FTSE China ETF (NYSE 🙂 – 22.1% since the beginning of the year (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%;
- ETF Invesco Golden Dragon China (NASDAQ 🙂 – 29.3%;
- Rayliant Quantamental China Equity ETF (NYSE 🙂 – 24.7%;
- SPDR S&P China ETF (NYSE 🙂 – 22.0%;
As these metrics show, 2022 was a difficult year for long-term Chinese bulls. Today’s article focuses on Chinese Internet stocks and the ETFs that invest in them.
Chinese internet stocks
With more than 1 billion Internet users, China is global biggest internet market. So it’s no surprise that investors are interested in Chinese online stocks, especially those from e-commerce.
InvestingPro web provides access to Chinese online stocks that can reach long-term investors. For example, those with a large capitalization include e-commerce icons Alibaba (NYSE 🙂 and JD.com (NASDAQ 🙂; online game giant NetEase (NASDAQ 🙂; internet search as well as AI behemot Baidu (NASDAQ 🙂; social media platform Weibo (NASDAQ 🙂; online discount retailer Vipshop (NYSE 🙂; and Autohome (NYSE 🙂.
Meanwhile, China’s fastest-growing Internet stocks include a social platform JOY (NASDAQ 🙂; Weibo; Alibaba Group Holding; JD.com; and NetEase.
Investors looking for undervalued Chinese Internet stocks may want to explore Weibo; Autohome; Baidu; Vipshop; Alibaba; and travel group Tuniu (NASDAQ 🙂.
Several stocks are currently traded at a relatively low price / book (P / B) ratio. Examples include Tuniu; media and gaming company Sohu.com (NASDAQ 🙂; JOY; the name of online entertainment Hi group (NASDAQ 🙂; and an e-commerce service provider Baozun (NASDAQ 🙂.
Finally, investors who pay attention to analysts’ pricing targets may be interested to know that several Chinese Internet stocks could rise sharply from current price levels. Alibaba, Baidu, Sohu.com, Weibo, JOYand JD.com is one of those stocks.
It is understandable that selecting stocks that best meet the individual objectives of the portfolio requires serious due diligence. Thus, retail investors may find it more advantageous to invest in ETFs that provide thematic access to China’s growing internet industry.
KraneShares CSI China Internet ETF
- Actual price: $ 26.68
- Range of 52 weeks: $ 20.41 – $ 73.54
- Cost ratio: 0.70% per year
The KraneShares CSI China Internet ETF (NYSE 🙂 invests in Chinese internet companies listed overseas, especially in the USA and also in Hong Kong (HK). He’s watching it .
KWEB, which was launched in July 2013, currently holds 47 shares. Regarding sector allocations, we see, among others, consumer goods (43.7%), communication services (41.8%) and industry (4.1%).
In 2022, ETF changed list weights to mitigate the potential impact of HFCAA legislation and de-listing in the US. More than two-thirds of the shares are now listed in Hong Kong (HK). This is followed by Chinese companies listed in the USA (26.2%). Finally, more than 5% of names are likely to have an early registration in Hong Kong.
The first 10 shares account for nearly two-thirds of net assets of $ 5.4 billion. These include Tencent (OTC :), which owns a number of gaming, social media and fintech companies; Alibaba; JD.com; Baidu; and the name of the on-demand delivery Meituan (OTC 🙂.
KWEB recorded a record high on June 1, 2021. But what a difference the year made. Since January, the fund has lost 26.8% and 61% in the last 12 months. On March 15, it reached a 52-week low.
Long-term investors looking to generate returns from the growing domestic consumption habits of China’s growing middle class should consider further research by the fund. Most likely, the malicious news was awarded in the KWEB ETF.