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Getting Involved With the High-Flying China Internet ETF


With Internet stocks, both the U.S. and global varieties remaining hot, it is not surprising that the KraneShares CSI China Internet ETF (KWEB) has been one of the most talked ETFs in recent weeks.

KWEB deserves the acclaim because the ETF has gained nearly 47% since its Aug. 1, 2013 debut. Under most circumstances, a 47% run in that amount of time is impressive, but KWEB’s success is even more so when considering Chinese stocks have been laggards for over a year. [Inside One of the Best China ETFs]

KWEB is up about 14% year-to-date and 21% over the past 90 days, leaving some investors to wonder if the ETF still has some upside left. It looks like the answer is “yes,” but entry points will prove critical.

KWEB’s “ daily chart shows the recent pullback off the highs, finding support at the 20-day MA. Since there was a sharp pullback to the 20-day exponential moving average, the price action may stall out and trend sideways for a while before the uptrend resumes. If so, then we will look for a low risk entry point to emerge early next week,” writes Deron Wagner of Morpheus Trading Group.

Being an ETF focused exclusively on Internet stocks means KWEB is not bereft of built-in momentum, but there are lingering catalysts that could propel the fund higher as 2014 moves along. For example, the next wave of Chinese Internet initial public offerings.

Last Friday, Weibo, the Chinese equivalent of Twitter (TWTR) filed plans for an IPO. Earlier this year, JD.com, the primary rival to Chinese e-commerce juggernaut Alibaba, filed plans for its own IPO. Of course, Alibaba is the 800-pound gorilla in the China Internet IPO room. [ETFs for the Next Wave of China Internet IPOs]

The stock is not public yet, but it appears likely it will list on a U.S. exchange and when it does, KWEB can add Alibaba shares just 11 days after the IPO.

KraneShares CSI China Internet ETF


ETF Trends editorial team contributed to this post.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.