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Singles' Day Shopping With This ETF

October 21, 2016 11:08 am
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With just a few days left in October, it is safe to say the U.S. holiday shopping season has arrived. However, before investors get too caught up in how Black Friday, Cyber Monday and related fare will affect their portfolios, one of the world's biggest consumer-driven events is on tap and it does not take place in the United States.

China's Singles’ Day, slated for November 11, can have a legitimate impact on U.S.-listed Chinese internet stocks such as Alibaba Group Holding Ltd (NYSE: BABA), JD.com Inc(ADR) (NASDAQ: JD) and Vipshop Holdings Ltd-ADR (NYSE: VIPS).

Enter the KraneShares CSI China Internet ETF — KraneShares Trust (NASDAQ: KWEB) — as an optimal way for U.S. investors to play Singles’ Day.

The KWEB Appeal

Over the past year, KWEB is up 23.2 percent, outperforming the largest dedicated U.S. internet ETF by more than 700 basis points over that period, a truly impressive data point when considering KWEB does not own high fliers such as Amazon.com, Inc. (NASDAQ: AMZN) or Facebook Inc (NASDAQ: FB).

Related Link: Big, Bigger, Biggest: Singles’ Day, Cyber Monday And Amazon’s Prime Day

Ahead of Singles’ Day, KWEB merits consideration, particularly if Alibaba exceeds expectations for the shopping holiday.

“Alibaba Group Holding Ltd. expects to surpass the record $14.3 billion in sales it made on Singles’ Day in 2015 by rolling out new activities like virtual fashion shows and augmented reality games to entice shoppers,” according to Bloomberg.

Alibaba is KWEB's largest holding, commanding nearly 12.2 percent of the ETF's weight, or about 190 basis points more than the fund dedicates to Tencent Holdings Ltd (OTC: TCTZF). JD.com and Vipshop combine for about 12.5 percent of KWEB's weight.

Fundamental data support KWEB's multiple. For example, China has 22 percent of the world's internet users, according to KraneShares data. That is more than double the amount found in the US and at the end of last year, China's e-commerce market was worth $590 billion, making the $324 billion U.S. e-commerce market seem paltry by comparison.

Why Chinese Internet?

Additionally, Chinese internet stocks traded at more attractive earnings multiples with better projected earnings growth than their U.S. counterparts.

Fortunately for KWEB investors, Alibaba is taking steps to ensure this Singles’ Day is another success.

“Alibaba has a number of strategies to ensure the spike in sales during the first few seconds of Nov. 11. This year, it’s adding more activities to get products preloaded into consumers’ digital shopping carts. At midnight, those transactions are completed through the company’s Alipay payments service,” reported Bloomberg.

“China's ecommerce market size reached $590 billion in 2015, compared to $342 billion in the U.S.,” according to KraneShares data. 

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