This week has been one in a series of a challenging ones for China as Shanghai lockdowns continue and the economic impacts spread. Despite the current broad outlook, there have been bright spots within Mainland China, particularly within the internet industry as investors have been scooping up stocks for some of the tech giants, reported KraneShares in the China Last Night blog.
Investors bought up shares in Tencent, Meituan, and other major internet companies this week, lifting the performance of the Hong Kong exchange. While there is no clear, specific piece of news that can be linked to why the internet sector is suddenly seeing significant interest from buyers, the space has benefited from the recent reassurances by major government entities that the regulatory cycle should be coming to a close.
The Chinese People’s Political Consultative Conference (CPPCC), an advisory body that is a face of representation for the Chinese Communist Party’s United Front strategy, is set to meet next week. Expectations from this forum are that further reassurances will be given that the internet regulatory cycle is done, and private companies such as Baidu will be in attendance.
“It is possible that this is the underlying reason for the rally and for Mainland investors’ enthusiasm for internet names this week,” KraneShares wrote.
The KraneShares CSI China Internet ETF (KWEB ) tracks the CSI Overseas China Internet Index and measures the performance of publicly traded companies outside of mainland China that operate within China’s internet and internet-related sectors.
This includes companies that develop and market internet software and services, provide retail or commercial services via the internet, develop and market mobile software, and manufacture entertainment and educational software for home use.
Many of the holdings contained in KWEB continue to trade at levels that are less than half of the multiples of their U.S. counterparts.
KWEB provides exposure to the Chinese internet equivalents of Google, Facebook, Amazon, eBay, and the like, all companies that benefit from a growing user base within China, as well as a growing middle class.
The ETF has an annual expense ratio of 0.70% and has $5 billion in AUM.
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