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KraneShares CSI China Internet ETF

KWEB:NYSE

equity ETF | passive | KraneShares | Tracks CSI (China Securities Index Co., Ltd.)

Market Price

US$35.82 (26 Jan 2026)

+21.35% (YoY)

NAV

US$35.90

-0.22% Discount

Yield

6.12%

+76.37% (YoY)

Expense Ratio

0.70%

+8% vs Avg: 0.65%

Making Headlines Box Set (ETF)

⚡ Executive Summary

📊 The Bottom Line

This ETF invests in publicly traded China-based companies primarily operating in the Internet and Internet-related sectors, listed outside of Mainland China. It offers focused exposure to China's digital economy with an expense ratio of 0.70%, slightly above the China Equities ETF category average of 0.65%. With a current market price of US$35.82 and NAV of US$35.90, it trades at a slight discount. Bull case projections see NAV reaching US$44.00, while the bear case suggests a downside to US$26.00.

⚖️ Risk vs Reward

The underlying holdings of KWEB currently trade at an aggregate P/E of 16.52x, indicating a modest premium to the broader China region average of 14.33x. The China Internet sector has shown periods of significant volatility, heavily influenced by regulatory shifts and evolving consumer sentiment. While the ETF has delivered a 1-year return of 23.21%, its 5-year annualized return remains negative at -11.16%. The concentrated nature of its top holdings amplifies both potential upside from a resurgent Chinese digital economy and downside risk from regulatory headwinds or macroeconomic slowdowns. Therefore, investors face an asymmetric risk/reward profile with substantial upside if catalysts materialize, but considerable downside if risks escalate.

🚀 Why KWEB Could Soar

• Accelerated regulatory easing by Chinese authorities could significantly boost investor confidence and company valuations, potentially leading to a 20-25% NAV appreciation.
• A stronger-than-expected rebound in Chinese consumer spending would directly translate to increased revenue and profitability for internet companies, driving 15-20% upside.
• Key holdings successfully expanding into new international markets or integrating AI could unlock significant new revenue streams, adding 10-15% to the ETF’s NAV.

⚠️ What Could Go Wrong

• Escalating US-China geopolitical tensions, including stricter capital controls, could lead to significant capital outflows and a 25-30% downside to NAV.
• Persistent weakness in Chinese consumer confidence and broader economic slowdowns could directly impact the internet sector’s growth and lead to a 15-20% decline in NAV.
• Intensified domestic competition among internet giants, potentially leading to price wars or margin compression, could result in a 10-15% drag on NAV.

🏢 Fund Overview

What Are You Actually Buying

The China Internet sector encompasses companies driving China's digital economy, including e-commerce, social media, online gaming, search engines, and other internet-related services.
These companies capitalize on China's vast and expanding internet user base, increasing domestic consumption, and continuous technological advancements.
Primarily listed in Hong Kong or the US, these firms are characterized by high growth potential, rapid innovation, and a dynamic competitive landscape, representing a significant portion of China's economic transformation.

Market Dynamics & Outlook

The sector is highly responsive to evolving Chinese regulatory policies, which have historically introduced periods of market uncertainty but can also lead to more standardized industry practices.
Continued urbanization and the growth of China's middle class are expected to drive sustained demand for online services, supporting the long-term growth trajectory of internet companies.
Geopolitical tensions and potential delisting risks for US-listed Chinese companies remain a significant concern, although many companies have sought secondary listings in Hong Kong to mitigate this risk.

🎯 Why This Matters

Understanding the complex interplay of domestic consumption trends, technological innovation, and regulatory oversight is crucial for KWEB investors. The sector's inherent volatility necessitates a comprehensive view of these dynamics to navigate its investment potential and associated risks.

📈 Valuation & Analysis

Historical Performance

YTD

+0.17%

+23.21%

Yearly Growth (3Y)

-0.40%

Yearly Growth (5Y)

-11.16%

Yearly Growth (Since Inception)

+3.25%

Current Valuation

The KraneShares CSI China Internet ETF’s underlying holdings currently trade at an aggregate Price/Earnings (P/E) ratio of 16.52x and a Price/Book (P/B) ratio of 2.07x as of January 22, 2026. This valuation stands above the category average P/E of 14.33x and the index average of 13.22x, suggesting that investors are currently paying a modest premium for the growth prospects of the internet companies within the portfolio. The ETF also offers a trailing twelve-month (TTM) yield of 6.12%. While these valuations are not considered excessively stretched compared to historical highs observed in other growth-oriented sectors, they indicate that future performance will largely depend on the realization of anticipated earnings growth and sustained market confidence in the sector.

The Bull Case - Upside to

Accelerated Regulatory Easing and Pro-Growth Policies

Medium Probability

Further softening of regulatory stances by Chinese authorities, coupled with direct government support for the digital economy, could significantly boost investor confidence and company valuations, potentially leading to a 20-25% NAV appreciation (US$42.00-US$44.88) over 12-18 months.

Stronger-Than-Expected Chinese Economic Recovery

Medium Probability

A robust rebound in Chinese consumer spending and broader economic activity would directly translate to increased revenue and profitability for internet companies, driving earnings growth and potentially a 15-20% upside to NAV (US$41.28-US$43.08).

Innovation and Global Expansion Success

Medium Probability

Key holdings successfully expanding into new international markets (e.g., Temu, TikTok) or launching innovative products/services (e.g., AI integration) could unlock significant new revenue streams, adding 10-15% to the ETF's NAV (US$39.49-US$41.28).

The Bear Case - Downside to

Geopolitical Tensions and Further Decoupling

Medium Probability

Escalating US-China geopolitical tensions, including stricter capital controls or accelerated delisting of US-listed Chinese companies, could lead to significant capital outflows and a 25-30% downside to NAV (US$25.13-US$26.93).

Persistent Weakness in Chinese Consumer Confidence

Medium Probability

A continued slowdown in consumer spending and broader economic challenges within China could directly impact the revenue growth and profitability of the internet sector, leading to a 15-20% decline in NAV (US$28.72-US$30.52).

Intensified Domestic Competition and Margin Compression

Medium Probability

Increased competition among Chinese internet giants, potentially leading to price wars or higher marketing expenses, could compress profit margins across the sector, resulting in a 10-15% drag on NAV (US$30.52-US$32.31).

Risk/Reward Assessment

The risk-reward profile for KWEB is heavily influenced by the interplay of China's domestic policies and global geopolitical dynamics. On the upside, a concerted effort towards regulatory stability and economic stimulus, coupled with the proven innovative capacity and global ambitions of its major holdings, presents a compelling case for significant NAV appreciation. However, investors must be mindful of the material downside risks, particularly those stemming from escalating US-China tensions or a more protracted domestic economic slowdown. The sector's high-growth, high-volatility nature implies that while rewards could be substantial, they come with a commensurate level of risk. This ETF is suitable for investors with a high-risk tolerance and a long-term investment horizon who believe in the enduring growth story of China's digital economy, despite its inherent uncertainties.

Peer Comparison

KWEB offers specialized exposure to the China Internet sector, differentiating itself from broader China ETFs. While its 0.70% expense ratio is slightly higher than some diversified peers, it provides targeted access to a high-growth segment. Its performance can be more volatile than broader China ETFs but may offer higher upside during periods of strong sector tailwinds. Compared to its peers, KWEB tends to have a higher dividend yield, reflecting distributions from its underlying holdings. Its liquidity, evidenced by its significant AUM, generally ensures efficient trading, though its bid-ask spread might be slightly wider than the most liquid large-cap China ETFs.

Fund	Expense Ratio	AUM (B)	1Y Return	3Y Return	5Y Return	Yield
KraneShares CSI China Internet ETF (KWEB) ⭐	0.70%	US$8.7B	23.21%	-0.40%	-11.16%	0.06%
iShares MSCI China ETF (MCHI)	0.59%	US$8.1B	38.66%	7.48%	-5.14%	0.02%
iShares China Large-Cap ETF (FXI)	0.74%	US$6.6B	32.29%	9.33%	-3.10%	0.02%
Invesco China Technology ETF (CQQQ)	0.65%	US$3.2B	50.44%	6.64%	-9.36%	0.02%

🎯 Why This Matters

This valuation analysis highlights KWEB's growth-oriented nature, trading at a premium to broader China equity categories. The high conviction from Wall Street analysts on core holdings underscores the potential for continued strong performance, yet the sector's inherent volatility and geopolitical sensitivities demand careful consideration for investors seeking exposure to China's digital economy.

📊 Appendix

Top 10 Holdings (80+ of ETF Value)

#	Ticker	Logo	Name	Sector	Weight
1	700	T	Tencent Holdings Ltd	Communication Services	0.1%
2	9988	A	Alibaba Group Holding Ltd	Consumer Cyclical	0.1%
3	PDD	P	PDD Holdings Inc	Consumer Cyclical	0.1%
4	3690	M	Meituan-Class B	Consumer Cyclical	0.1%
5	9999	N	NetEase Inc	Communication Services	0.1%
6	9888	B	Baidu Inc-Class A	Communication Services	0.0%
7	1024	K	Kuaishou Technology	Communication Services	0.0%
8	6618	J	JD Health International Inc	Healthcare	0.0%
9	2423	K	KE Holdings Inc	Real Estate	0.0%
10	9618	J	JD.com Inc-Class A	Consumer Cyclical	0.0%

Fund Mechanics

How It Works

The KraneShares CSI China Internet ETF (KWEB) is a passively managed exchange-traded fund designed to track the performance of the CSI Overseas China Internet Index. This index specifically targets publicly traded 'China-based companies' whose core business activities are concentrated in the Internet and internet-related sectors. These companies are typically listed outside of Mainland China, primarily on the Hong Kong Stock Exchange, NASDAQ Stock Market, or New York Stock Exchange. The index employs a free-float market capitalization-weighted methodology, meaning companies with larger market values and readily available shares for public trading will have a greater influence on the index's performance. The fund aims to invest at least 80% of its net assets in instruments that are either part of its underlying index or have similar economic characteristics. The index is rebalanced and reconstituted semi-annually to ensure it continues to accurately reflect the dynamic China internet landscape. This strategy offers investors focused exposure to a segment of the Chinese economy that is heavily driven by consumer growth and technological innovation.

Holdings Breakdown

Number of Holdings

Top 10 Concentration

6106.0%

Top 20 Concentration

8977.0%

Turnover Rate

5400%

Category	Weight	Description
Communication Services	43.9%
Consumer Cyclical	35.3%
Healthcare	7.9%
Real Estate	4.2%
Technology	3.4%
Consumer Defensive	3.2%
Financial Services	2.1%

Cost Efficiency

Expense Ratio

0.70%

Expense Ratio History

Year	Expense Ratio
2025	0.70%
2024	0.70%
2023	0.70%

Performance History

Year	ETF Return	Benchmark Return	Tracking Diff	Volatility	Max Drawdown	Sharpe Ratio
2025	23.50%	N/A	N/A	N/A	N/A	N/A
2024	11.90%	N/A	N/A	N/A	N/A	N/A
2023	-9.00%	N/A	N/A	N/A	N/A	N/A
2022	-17.20%	N/A	N/A	N/A	N/A	N/A
2021	-48.90%	N/A	N/A	N/A	N/A	N/A

Annualized Return Since Inception

3.25%

Detailed Peer Comparison

Ticker	Name	Issuer	Exp Ratio	AUM (B)	1Y	3Y	5Y	Yield	StdDev 3Y	Sharpe 3Y	Spread
KWEB ⭐	KraneShares CSI China Internet ETF	KraneShares	0.70%	US$8.7B	23.2%	-0.4%	-11.2%	0.06%	N/A	1.10	N/A
MCHI	iShares MSCI China ETF	BlackRock iShares	0.59%	US$8.1B	38.7%	7.5%	-5.1%	0.02%	N/A	1.55	N/A
FXI	iShares China Large-Cap ETF	BlackRock iShares	0.74%	US$6.6B	32.3%	9.3%	-3.1%	0.02%	N/A	1.45	N/A
CQQQ	Invesco China Technology ETF	Invesco	0.65%	US$3.2B	50.4%	6.6%	-9.4%	0.02%	N/A	N/A	N/A
Category Average			0.67%	—	33.6%	5.7%	-7.4%	0.03%	—	N/A	—

Risk Metrics

Beta

0.25

Standard Deviation

1 Year	3 Years	5 Years	10 Years
N/A	N/A	N/A	N/A

Sharpe Ratio

1Y	3Y	5Y	10Y
N/A	1.10	N/A	N/A

Sortino Ratio

3 Years	5 Years
N/A	N/A

Maximum Drawdown

1 Year	3 Years	5 Years	Since Inception
N/A	N/A	N/A	80.92%

Correlations

Liquidity & Trading

Volume

Avg Daily Shares

20,115,124

Avg Daily Dollar Volume

US$720.5M

Trend

increasing

Bid-Ask Spread

Metric	Value
Median (Percent)	N/A
Median (Dollar)	N/A
During Hours	N/A
At Close	N/A
Volatility	N/A

Premium/Discount to NAV

Metric	Value
Current	-0.22%
30-Day Average	N/A
1-Year Average	N/A
Standard Deviation	N/A
Max Premium (1Y)	N/A
Max Discount (1Y)	N/A

Creation/Redemption Activity

Trend

decreasing

Net Flows

Period	Net Flow
1 Month	US$-0.0M
1 Quarter	US$-0.0M
1 Year	US$0.0M

⚠️ Disclaimer: This ETF research report is for informational and educational purposes only. It does not constitute investment advice, a recommendation, or an offer to buy or sell securities. EC² Invest is not a registered investment advisor. All data is sourced from public sources and may contain errors. Past performance does not guarantee future results. ETF investing involves risk, including possible loss of principal. Always conduct your own research and consult with a qualified financial professional before making investment decisions.