Looking to invest in the growing role of China’s economy in global markets while mitigating exposure to trouble areas like the nation’s real estate problems? A travel ETF like KLXY, the KraneShares Global Luxury Index ETF, could be one strong option. While global tourism did rebound last year, Chinese tourism did not necessarily recover as markets expected. This year could deliver that tourism growth and make for an intriguing investing idea moving forward.
A Luxury ETF for Global Travel
What happened to Chinese tourists last year? Many traveled domestically within China, limiting an overall rebound in global travel. While in 2019, Chinese tourists made about 155 million outbound trips, early data for the first half of last year suggests just about 40 million trips.
While not every tourist who traveled in 2019 will necessarily return to travel abroad in 2024, tens of millions more Chinese citizens could still decide to travel this year compared to last. What’s more, the country’s aviation regulator recently shared it projects international flights to reach about 80% of pre-pandemic levels by the end of the new year.
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Add in the lingering savings glut many Chinese consumers gathered during the “Zero-COVID” regime, and big travel and luxury companies could benefit. Those firms are also headquartered and operate at a remove from the challenges facing Chinese companies, while still popular with Chinese consumers themselves.
A luxury ETF like KLXY, then, may appeal. KLXY tracks the Solactive Global Luxury Index for a 69 basis point (bps) fee. The ETF’s index looks for firms engaged in luxury goods, travel & leisure, and more that also meet size and trading volume minimums. The travel ETF also caps securities outside of the top five to a maximum weight of 4.5%, while weighting the largest securities at 10%. Returning 6.6% over the last three months, KLXY could benefit should global tourism benefit from a China travel rebound.
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