This year, Chinese growth stocks have been hampered by declines by the broader market in the world’s second-largest economy. But some market observers believe it will be high-octane consumer internet and technology equities that ignite a new China bull market in 2024.
Should that prediction prove accurate, it’d likely benefit exchange traded funds such as the KraneShares CSI China Internet ETF (KWEB). While this has been a trying year for broader China benchmarks and ETFs, KWEB deserves a bit of credit. The fund is outpacing the widely followed MSCI China Index by about 250 basis points, as of December 8.
Recently, some KWEB holdings have shown signs of life, indicating the ETF could merit near-term consideration for investors looking to position for the possibility of a more earnest rebound by Chinese stocks in 2024.
Call on KWEB for China Rebound
In a recent report to clients, JPMorgan analysts highlighted several Chinese growth stocks that could be leaders should that country’s equity markets rebound next year. The bank called the names, several of which reside in the KWEB portfolio, “timely buys” noting that “fundamentals and market capitalization [are]emerging from troughs.”
Alibaba (NYSE: BABA), KWEB’s second-largest holding, at a weight of almost 9%, wasn’t among the bank’s most preferred Chinese growth stock ideas. But the stock gained some praise from analysts as an avenue for investors looking to tap into China’s burgeoning artificial intelligence (AI) market.
Among the KWEB holdings that fit JPMorgan’s bill as “timely buys” are the ETF’s largest component, Tencent (700-HK). Tencent, which is China’s largest internet company, accounts for 9.81% of the KWEB portfolio and jibes with JPMorgan’s view that growth over value will carry the day for Chinese stocks in 2024.
NetEase (NTES) and Kuaishou Technology (1024-HK) are also among JPMorgan’s top ideas among Chinese stocks for 2024. Both are top 10 holdings in KWEB, and combine for nearly 10% of the ETF’s roster.
Another issue to consider, particularly when it comes to KWEB and Chinese growth stocks, is how monetary policy shapes up in the country next year. Some clues to that effect could arrive over the near term.
“That policy meeting has been widely expected this fall. But there’s been no formal announcement while winter approaches. Also filling up the calendar is the annual central economic work conference for setting year-ahead policy, typically held in the middle of December,” reported Evelyn Cheng for CNBC.
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