Market Overview

China Internet ETF Lands Morningstar 5-Star Rating


Since coming to market just over three years ago, the KraneShares CSI China Internet ETF (NASDAQ: KWEB) has set a torrid pace compared to other China-focused exchange traded funds. Over that period, KWEB is up more than 37 percent, a performance that tops the largest China ETF trading in New York by a factor of better than 10-to-1.

KWEB is being recognized for that stellar run. After a fund reaches the three-year mark, that is about the time it can start receiving accolades and honors, if deserving, from various fund rankings providers. KWEB landed Morningstar's prestigious five-star rating, according to New York-based KraneShares

KWEB has developed a cult following in its three years of trading; China has more Internet users than the U.S. has population. Additionally, KWEB and rival ETFs are known for being home to companies that are considered to be the Amazons, Facebooks and Googles of China. There are potential catalysts for KWEB and its holdings that may not be fully appreciated at the moment.

“China’s desire to increase domestic consumption led Premier Li Keqiang to announce the Internet Plus strategy on March 5th at the 2015 National People’s Congress Session,” according to a KraneShares research note. “The new policy aims to drive economic growth by integrating internet technologies with traditional sectors and will focus on fostering new industries and business development, including ecommerce, industrial internet, and internet finance.”

In fact, China has 22 percent of the world's Internet users, according to KraneShares data. That is more than double the amount found in the U.S. and at the end of last year, China's ecommerce market was worth $590 billion, making the $324 billion U.S. ecommerce market seem paltry by comparison.

At the end of the second quarter, KWEB was home to 36 stocks, including names familiar to U.S. investors, such as Alibaba Group Holding (NYSE: BABA), (NASDAQ: BIDU), (NASDAQ: JD) and (NASDAQ: CTRP).

“China's internet population reached 668 million people in 2015, a penetration of only 50%. The U.S. internet population reached 280 million people in 2015, a penetration rate of 87%,” according to KraneShares. “Chinese retail websites sold $590 billion worth of goods in 2015, an increase of 33.3%. Online shopping accounts for 12.9% of retail purchases in China during the year.”


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