China ETF KWEB Digs Into Alibaba Profits

Earnings season has turned to Alibaba (BABA), one of China’s biggest firms. The major e-commerce company reported a net profit for the first quarter, a 51% year-over-year increase. That result comes from a combination of higher revenue, business momentum, and overall operating efficiency growth. BABA’s strong performance not only has implications for its own outlook, but also verifies the strong start Chinese markets had in 2023. Taken together, investors may want to eye a China ETF like KWEB.

Alibaba had previously shared plans to split into separate business units, with each looking for its own IPO. That holding company model of six units boosted the firm’s outlook and long-term valuations from that time. BABA operates both consumer-to-consumer and business-to-consumer angles, with its commerce retail division responsible for 67% of revenue, per YCharts. BABA has seen solid 27.3% five-year revenue growth, with an 11.7 forward P/e ratio, too.

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The revenues also speak to healthier overall spending to start the year, which should boost China market watchers concerned by a stubbornly high savings rate. With consumers still dealing with “scarring” from the tough lockdown, high savings rates remain a key headwind. As such, the BABA earnings news represents some positive news that should invite investors to revisit a China ETF like KWEB, the KraneShares CSI China Internet ETF.

KWEB holds Alibaba as its largest-weighted stock at 9.3%. The ETF focuses on offering pure-play Chinese software and info tech stocks. On top of that, as part of its index, the CSI Overseas China Internet index also owns a variety of lesser-known Chinese firms.

Those firms add some helpful diversification, with KWEB returning 7.4% over the last month. That return outperforms both its ETF Database category average and its FactSet segment average. For those investors looking to benefit from recent positive news for BABA, KWEB is one ETF to watch.

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