A New Spin On One Of This Year's Hottest Themes

Investors looking for this year's best-performing non-leveraged exchange-traded funds are likely to find a batch of funds with big allocations to internet stocks. Among that group, the truly elite performers will likely feature significant or dedicated exposure to Chinese Internet stocks.

Of course, the KraneShares CSI China Internet KWEB is one of the dominant names in that market segment and is cementing that status with a year-to-date gain of 68.5 percent. What that says is the Chinese consumer is a growing, vibrant investment theme. A new ETF from KraneShares hones in on opportunities with Chinese consumers.

The KraneShares Emerging Markets Consumer Technology ETF KEMQ debuted last week. The new ETF “seeks to track the Solactive Emerging Markets Consumer Technology Index. The Index selects companies from 26 eligible countries within emerging markets whose primary business or businesses are internet retail, internet software/services, purchase, payment processing, or software for internet and E-Commerce transactions,” according to New York-based KraneShares. 

A Common Theme

As is the case with many ETFs focusing on Chinese Internet or consumer-related stocks, KEMQ is heavily allocated to Chinese companies that are the equivalents of big-name U.S. firms such as Alphabet Inc GOOG GOOGL and Amazon.com, Inc. AMZN.

KEMQ's holdings include familiar names such as Baidu Inc (ADR)BIDU, China's largest Internet search provider; Alibaba Group Holding Ltd BABA, China's biggest e-commerce firm; and JD.Com Inc(ADR) JD.

As its name implies, KEMQ is not a dedicated China ETF. The ETF's underlying index also features exposure to South Korea, Brazil, and South Africa, among other developing markets.

Favorable Data

Various data points indicate KEMQ could be a long-term idea as more emerging markets consumers gain access to the Internet and developing world middle classes continue growing. Emerging markets consumers are expected to account for more than half of global consumption by 2030.

“Internet adoption is expanding rapidly within emerging markets at the same time that domestic consumption and retail sales are steadily increasing and frequently taking place online,” according to KraneShares. 

KEMQ, the second new ETF launched by KraneShares this month, charges 0.79 percent per year, or $79 on a $10,000 investment. The other new KraneShares ETF is the KraneShares MSCI China Environment ETF KGRN.

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