China internet ETFs shoot the lights out as sentiment shifts on ‘zero COVID’ policy

KWEB was the best performing European ETF in the week to December 5

Earlier, Chinese technology ETFs rose last week as bets on an end to the country’s COVID-19 lockdown are now turning optimistic.

In the week to December 5, the $481 million KraneShares CSI China Internet UCITS ETF ( KWEB ) led the way with a return of 23.3%, followed by the $317 million HSBC Hang Seng Tech UCITS ETF ( HSTC ) 20.5% and UBS $28 million . ETF Solactive China Technology UCITS ETF (CQQQ) gained 17.3%.

During the week, the $48 million Invesco MSCI China Technology All Shares Stock Connect UCITS ETF ( MCHT ) and the $14 million Xtrackers Harvest MSCI China Tech 100 UCITS ETF ( XCTE ) returned 15.1% and 14.7%, respectively.

The impressive performance coincided with the easing of restrictions in some Chinese cities.

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For example, residents of Shanghai no longer need to obtain a negative COVID test result when entering outdoor spaces such as parks, while cities such as Beijing and Shenzhen will allow passengers to travel on public transport without a negative test result.

The easing of “covid zero” measures also has some investment banks bullish on Chinese stocks for the first time in two years, with Goldman Sachs projecting double-digit returns on the MSCI China index and the CSI 300 index in 2023, while Morgan Stanley- The rating has improved. Overweight of Chinese stocks.

This was announced by Dr. Xiaolin Chen, CEO and Head of International Division of KraneShares, the issuer of the KWEB ETF. ETF flow China’s internet stocks are benefiting from positive economic sentiment as the “transmission engine for domestic consumption” increasingly moves online.

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“China’s internet stocks have been dubbed ‘China’s best reopening play'” as companies hit e-commerce, online travel bookings and ‘distressed’ ratings over the weekend, Chen added.

“Policy changes to combat COVID-19 and China’s real estate support financing set the stage for a market consolidation and stabilized investor sentiment on China’s oversold Internet stocks.”

China’s upcoming Politburo meeting today will further clarify China’s economic policy ahead of the upcoming Central Economic Work Conference (CEWC), Chen said.

KWEB rose 24.4% for the week after US core price inflation (CPI) came in lower than expected in mid-November and the Chinese Communist Party (CCP) announced plans to roll back 70 new 20-point COVID policies. Online gaming licenses to firms such as Tencent and NetEase.

However, China’s COVID-19 cases have reached 35,000 a day, the highest since the pandemic began, and fears of reimposing lockdown measures have sparked the country’s biggest protests in 30 years.

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While such fears have yet to materialize, European investors only allocated an additional $2.4 million to KWEB during the week’s strong performance, suggesting investors remain uncertain about the CCP’s COVID policy.

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