Earlier this year, China announced it had close to one billion internet users—and growing, as reported Forbes.
China’s internet users now number nearly three times the entirety of the U.S. population.
Internet usage in China is growing rapidly: the China Internet Network Information Center (CNNIC) reported that as of December of 2020, there were 989 million internet users, a number that had increased by 85.4 million from March of the same year.
China has also touted the largest online retail market for 8 years straight according to the CNNIC. In 2020, e-commerce sales jumped 10.9% to $1.8 trillion from the previous year, as compared to $861 billion in the U.S. in the same time period.
Many of the companies serving those Chinese e-consumers are based and listed in Hong Kong, including semiconductor manufacturers and 5G firms.
KTEC Captures Exposure to Growing E-Commerce and Internet Usage in China
For investors seeking exposure to Hong Kong’s tech sector, the new KraneShares Hang Seng TECH Index ETF (KTEC) offers exposure to internet stocks, e-commerce companies, fintech firms, and other tech-related companies.
KTEC tracks the 30 technology companies in Hong Kong’s burgeoning tech sector with the highest free float market capitalization.
The fund invests primarily in China H shares—meaning shares of stocks that are incorporated in mainland China and trade on the Hong Kong Stock Exchange.
Companies that qualify for the index must all meet one of three criteria: They must be “technology-enabled,” meaning they operate primarily from a mobile or internet platform; they must have an R&D expenses-to-revenue ratio that is equal to or greater than 5%; or they must have year-over-year growth equal to or greater than 10%.
They must all also be “Greater China” companies, meaning they have their headquarters in Hong Kong, Macau, or China; they’re incorporated in Hong Kong; or that they attain 50% of their revenue from mainland China.
Additionally, eligible stocks must fall within the following sectors: industrials, consumer discretionary, healthcare, financials, and information technology
No single stock has more than 8% weight in the index.
The top 3 holdings in KTEC include Tencent Holdings LTD (8.15%), a multinational technology company, Kuaishou Technology (8.05%), a Chinese video-sharing platform, and Xiaomi Corp Class B (8.05%), a multinational Chinese electronics company.
KTEC has a total annual fund operating expense of 0.69%.
For more news, information, and strategy, visit the China Insights Channel.