China’s technology industry is different from what we’re used to in America. Sites like Google, Facebook, and Twitter are banned by the country’s government and their Great Firewall. Amazon China exists, though it’s nowhere near as popular as it is stateside. Smart phones made by Apple are popular, but they don’t hold a candle to Chinese-made products.
Despite the absence of certain sites and the decreased popularity of western brands, China’s tech-loving masses still enjoy the same internet-connected conveniences. Baidu ($BIDU) is the country’s Google analog and one of the largest internet-based companies in the world. Tencent’s WeChat ($0700) is China’s answer to Facebook, and it is also how much of the country currently exchanges currency. Even Alibaba ($BABA) outsells Amazon China by a wide margin in the country.
These Chinese internet giants own the bulk of the market share in their respective fields, and they are growing fast. They’re also publicly traded, which means you can invest in them as they hold a near-monopoly in their home country. Yet investing in them individually is expensive, especially if you want to own more than one share. What’s even worse is how some brokerages don’t directly support purchasing stocks on foreign exchanges.
That is why the KraneShares China Internet Fund exists. If you want to invest in Chinese internet-based companies but don’t have crazy amounts of cash or access to the Hong Kong Stock Exchange, this exchange-traded fund might be your best bet.
The China Internet Fund invests in major Chinese internet companies.
This exchange-traded fund, which trades under the $KWEB symbol, follows the CSI Overseas China Internet Index. This index follows major internet-based companies in China and averages their performance using a weighted average. If the index goes up, then the industry is performing well, and vice versa. Since $KWEB follows the index, it only performs as well as the index does.
$KWEB also holds millions of shares in all stocks listed on the aforementioned index. By buying into this fund, you’ll own percentages of shares in companies like Alibaba, Tencent, Baidu, JD.com, and dozens of other Chinese companies. When the average performance of these companies is up, the fund increases in value. If there’s a decline in the industry, the fund decreases in value.
The cost of entry is rather low.
If you were to only buy one share each in each of the companies held by this fund, you’d end up paying thousands of dollars. $KWEB, on the other hand, costs $48.46 per share as of this writing. While this doesn’t entitle you to individual shares from each Chinese internet company, it still lets you make gains when they increase in value. Simply put, if you want to invest in Chinese tech companies — specifically those focused on internet applications and services — this is one of the least expensive ways to do so.
$KWEB is an American-run fund.
Unlike many of the companies in the ETF, $KWEB trades on the Nasdaq, an American Stock Exchange. KraneShares, the company managing the fund, is based out of New York and specializes in Chinese ETFs. If you have a brokerage account that only deals with American exchanges (like Robinhood), you can still buy $KWEB and invest in Chinese companies.
$KWEB isn’t the only ETF of its kind.
The iShares FTSE/Xinhua China 25 Index ($FXI) is another ETF that owns Chinese internet companies. Unlike $KWEB, it also holds Chinese financial and energy companies. $FXI is a significantly larger fund than $KWEB, though its gains in the last year-plus are nowhere near as impressive.
Should you invest in $KWEB?
Chinese internet-based companies are only growing in strength and power as the Chinese middle class grows. $KWEB is also growing tremendously. The ETF is up 39.63% since the beginning of this year, and 41.96% in the last year.
If you ever wanted to invest in the Chinese market without breaking your bank account, this might be a viable option. Just be sure to do your research first. If you want to invest in the tech sector but only focus on U.S. companies, that’s always an option, too.