In most aspects of life, the adage “the grass is always greener…” references sacrificing one thing for another. However, in the stock market realm, it’s not that cut and dried.
When it comes to the Internet and Information Technology sectors, the U.S. stock market has some stiff competition, and it hails from China. But there’s no need to wonder if that grass is indeed greener, as KraneShares CSI China Internet ETF (NYSEArca: KWEB) is a one-of-a-kind exchange-traded fund (ETF) that offers pure-play exposure to Chinese software and information technology stocks.
KWEB tracks a foreign equity index composed of overseas-listed Chinese internet companies. The ETF offers not only exposure to companies that provide services similar to U.S. internet companies, like Google (NASDAQ:GOOG), Facebook (NASDAQ:FB) and Twitter (NYSE:TWTR), but it also offers exposure to companies that are benefitting from an increase in domestic consumption by China’s growing middle class. The fund specializes in Chinese markets and its portfolio ranges from well-known large-cap stocks, like Alibaba (NYSE:BABA), to smaller- and mid-cap stocks.
The fund, which was started in 2013, has an expense ratio of 0.73% and a dividend yield of 0.43%, with an annual payout of $0.22. KWEB has $4.75 billion in assets under management and $4.7 billion in net assets. As evidenced by the chart below, KWEB was stable for the latter months of 2020, spiked higher in early 2021 and is now experiencing a major dip. However, this dip is not without reason, as many Chinese stocks in the space recently have experienced serious selling, which was prompted by the government’s crackdown on for-profit education. The fund is currently trading at the lower end of its 52-week range, $45.75-104.94, but the high-end is proof that it possesses the potential to bounce back.
The fund’s top five holdings and their respective weightings, as of Aug. 3, were Alibaba Group Holdings Ltd ADR (BABA), 10.89%; Tencent Holdings Ltd (00700), 10.30%; JD.com Inc. ADR (JD), 7.46%; Meituan (03690), 7.17%; and Pinduoduo Inc ADR (PDD), 7.07%.
In sum, KWEB is a unique way to tap into China’s Internet and information technology sectors. It offers exposure not only to well-known large-cap and a variety of smaller- and mid-cap stocks, but equities benefitting from China’s growing middle class. For investors looking to expand their global equity palates and see if the grass is truly greener, KraneShares CSI China Internet ETF (NYSEArca:KWEB) may be of interest. However, investors are always advised to conduct their own research and decide whether a given fund is suitable for their investing goals.
As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an email. You just may see your question answered in a future ETF Talk.