Oft-cited as a proverb, “May you live in interesting times” is actually an old Chinese curse. The hex probably is not in effect,
nor should it be, but these are indeed interesting times for the KraneShares CSI China Internet ETF (KraneShares
Trust (NASDAQ: KWEB)).
Celebrating Singledom
A big part of the reason this is an important (and interesting) multi-day stretch for KWEB is that Friday is China's Singles'
Day, a shopping event that makes Cyber Monday look like a Wednesday in April at the local shopping mall.
Of course, Alibaba Group Holding Ltd (NYSE: BABA) is
one of the stocks in the Singles' Day spotlight. Alibaba generated $14.3 billion on Singles' Day 2015, a number the Chinese company
is expected to easily
surpass this year. Alibaba, which accounted for nearly 12 percent of KWEB's weight
as of November 9, making it the ETF's largest holding, is off to a banner start this Singles' Day.
The Chinese e-commerce giant is trotting out celebrities of various stripes to promote Singles' Day, including star athletes
David Beckham and Kobe Bryant. It would appear the strategy is working. KWEB's largest holding generated $1 billion in sales in the
first
five minutes of Singles' Day. To put that into context, Alibaba doubled in five minutes the revenue generated by Amazon.com,
Inc. (NASDAQ: AMZN) during all of the most recent Prime
Days.
China Vs. U.S. Internet ETFs
KWEB is also attractively valued relative to equivalent U.S. internet ETFs.
In a recent interview with KraneShares, Michael Krause of
the ETF Research Center explored KWEB's valuations.
“While KWEB’s forward price-to-earnings (P/E) may look high at 38x, P/E doesn’t always tell the full story. KWEB’s long term
earnings per share (EPS) growth rate estimate is 36 percent,” said Krause. “Like all the metrics we calculate, we look at the
consensus estimates from analysts covering the stocks held by exchange traded funds. These analysts provide estimates on what they
believe a company’s earnings per share (EPS), revenue, dividends and other financial metrics will be. Long-term EPS growth is
simply the aggregate of Wall Street analysts’ estimates for each of KWEB’s holdings.”
Additionally, index provider MSCI will soon detail its plans to include or exclude more Chinese internet companies in its
international indexes. MSCI has afforded Alibaba and Baidu Inc (ADR) (NASDAQ: BIDU) that privilege, but that courtesy could be extended to several other KWEB
holdings, including SINA Corp (NASDAQ: SINA) in
the coming
days.
Increased buying of individual Chinese internet stocks by active managers needing to get in line with MSCI benchmarks could be a
near-term catalyst for KWEB.
Image Credit: By Solomon203 (Own work) [CC BY 3.0], via Wikimedia Commons
© 2016 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.