An ETF For China's Internet Celebrities

In the United States, there are YouTube celebrities. China, by way of having a slew of internet companies that can be considered the Amazon.com, Inc. AMZN, Facebook Inc FB or Alphabet Inc GOOG GOOGL's Google of the world's second-largest economy, has its equivalents of YouTube celebrities.

That theme is accessible via the KraneShares Trust KWEB. KWEB is the bellwether China internet and technology exchange-traded fund trading in the United States and, one month into 2017, is reminding investors that it is a legitimate complement or alternative to traditional China ETFs that are often chock full of low growth, state-controlled companies.

KWEB

Year-to-date, KWEB is higher by nearly 9.8 percent, an advantage of more than 400 basis points over the largest U.S.-listed China ETF.

While KWEB is often highlighted for its exposure to Alibaba Group Holding Ltd BABA, China's largest e-commerce company, the ETF is undoubtedly a credible play on the China internet celebrities theme.

“A powerful group of tech savvy, entrepreneurial, and predominantly female influencers have emerged as China’s new tastemakers on social media, and they are equally as adored by their fans as they are by major brands,” according to a recent KraneShares research piece.

Weibo, YY And Inke

As KraneShares noted, Weibo Corp (ADR) WB is a blend of Facebook and Twitter Inc TWTR. Interestingly, since its initial public offering more than two and a half years ago, Weibo has managed to outperform Facebook, no small feat considering the latter has more than doubled over that period. Weibo also embarrassed Twitter, the latter of which has plunged over the past two-plus years.

That is good news for KWEB because Weibo is among the 34 stocks on the China internet ETF's roster.

“Weibo Celebrities inhabit a space similar to those Western celebrities who are ‘famous for being famous.’ Fans follow their favorite Weibo Celebrity as they live idealized lifestyles: posting their travels abroad, fancy meals at restaurants, and the clothing they use to express their individual style. Beyond posting images, they also host live broadcasts on video streaming platforms like YY and Inke,” added KraneShares.

Shares of YY Inc (ADR) YY are up more than 260 percent since the company's IPO in November 2012.

Valuations for KWEB holdings compare favorably to the comparable U.S. companies. For example, KWEB's P/E ratio at the end of 2016 was just under 25.6 while the same ratio on the largest U.S.-focused internet ETF is about 27.5.