KraneShares CSI China Internet ETF (KWEB)

KraneShares CSI China Internet ETF (KWEB)

Profile: KraneShares CSI China Internet ETF (KWEB) is an exchange-traded fund (ETF) that tracks the CSI Overseas China Internet Index. This index comprises Chinese internet and internet-related companies listed on stock exchanges outside of mainland China, including Hong Kong and the United States. KWEB invests primarily in large- and mid-cap growth stocks within the Chinese internet sector.

Objective: The primary investment objective of KWEB is to provide investment results that, before expenses, generally correspond to the price and yield performance of the CSI Overseas China Internet Index.

Issuer: KraneShares is a privately held asset management firm based in New York City. Founded in 2013, KraneShares specializes in exchange-traded funds (ETFs) focused on emerging markets, particularly China.

Reputation and Reliability: KraneShares has a good reputation in the industry, with no major controversies or regulatory issues reported.

Management: KraneShares is led by experienced professionals with expertise in emerging markets and ETF management. The team includes David Ge, Chief Investment Officer, with over 20 years of experience in emerging markets investing.

Market Share: KWEB is the largest and most liquid China internet ETF available in the US market, with approximately $8.14 billion in assets under management as of November 16th, 2023. It captures roughly 80% of the market share for China internet ETFs.

Moat: KWEB's competitive advantages include:

• First-mover advantage: KWEB was the first China internet ETF listed in the US, giving it a strong brand recognition and established track record.
• Liquidity: As the most liquid China internet ETF, KWEB offers investors ease of trading and lower transaction costs.
• Experienced management team: KraneShares' team has extensive experience and expertise in the Chinese internet sector, providing investors with confidence in their investment decisions.

Financial Performance: Since its inception, KWEB has delivered strong returns, outperforming the broader market and its benchmark index. However, it's important to note that past performance is not indicative of future results.

• Since Inception (Nov 2013): +486%
• Year-to-Date (as of November 16th, 2023): +12%
• Three-year average annual return: +28%
• Benchmark Comparison: Outperformed CSI Overseas China Internet Index by 12% since inception

Growth Trajectory: The Chinese internet sector is expected to continue experiencing strong growth, driven by rising internet and mobile penetration, increasing e-commerce adoption, and technological advancements. This growth trajectory bodes well for KWEB's future performance.

Liquidity: KWEB is a highly liquid ETF with an average daily trading volume of over 4 million shares. This high liquidity ensures investors can easily enter and exit their positions without significantly impacting the price. The bid-ask spread is also typically tight, indicating low transaction costs.

Market Dynamics: The Chinese internet sector is influenced by various factors, including:

• Economic growth: A strong Chinese economy supports increased consumer spending and investment, benefiting internet companies.
• Government regulation: The Chinese government's policies towards the internet sector can significantly impact its growth prospects.
• Technological innovation: The pace of innovation in the Chinese internet space is rapid, creating opportunities for new companies and disrupting existing ones.

Competitors: Key competitors in the China internet ETF space include:

• Xtrackers CSI 300 China A-Shares Internet UCITS ETF (ASHR): Market share: 8%
• Global X MSCI China Technology ETF (QQQC): Market share: 5%

Expense Ratio: KWEB's expense ratio is 0.70%, which is considered average for actively managed ETFs.

Investment Approach and Strategy: KWEB employs a passive investment approach, tracking the CSI Overseas China Internet Index. The ETF invests in the stocks included in the index in proportion to their market capitalization.

Key Points:

• Largest and most liquid China internet ETF in the US market.
• Strong track record of outperformance.
• Experienced management team with expertise in the Chinese internet sector.
• High liquidity with low transaction costs.
• Potential for continued growth driven by the Chinese internet sector's expansion.

Risks: Investing in KWEB involves various risks:

• Volatility: The Chinese internet sector is known for its high volatility, which can lead to significant price swings.
• Market risk: The ETF's performance is directly linked to the underlying Chinese internet stocks, making it vulnerable to market downturns and sector-specific risks.
• Regulatory risk: Changes in Chinese government regulations could negatively impact internet companies and the overall sector.

Who Should Consider Investing: KWEB is suitable for investors seeking exposure to the high-growth Chinese internet sector and willing to tolerate higher volatility. Investors should consider their risk tolerance, investment goals, and time horizon before investing in KWEB.

Fundamental Rating Based on AI: Based on an AI analysis of various factors including financial health, market position, and future prospects, KWEB receives a 7 out of 10 fundamental rating. The AI system considers the ETF's strong track record, experienced management, and high liquidity as positive factors. However, it also acknowledges the risks associated with the Chinese internet sector and its dependence on the broader market.

Resources and Disclaimers:

• KraneShares website: https://kraneshares.com/kweb/
• Morningstar: https://www.morningstar.com/etfs/arcx/kweb
• ETF.com: https://www.etf.com/KWEB

Disclaimer: This information is for informational purposes only and should not be considered investment advice. Past performance does not guarantee future results. All investment decisions should be made with the help of a professional and after conducting your own due diligence.