End of regulatory risk in China’s Internet sector

Chinese Premier Li Qiang’s recent meetings with the heads of China’s biggest internet companies end a long chapter of regulatory risk and crackdown in the industry. As one of the biggest headwinds for investors over the past two years becomes a tailwind, he considers the (KWEB extension b).

Premier Li met with a number of executives from major technology companies this week, including Alibaba, ByteDance Ltd and Meituan, Bloomberg reported. The meeting proved extremely successful, with government officials pledging to ensure greater transparency and predictable regulation in the future.

Furthermore, the government has made clear its support for the sector and has encouraged companies to do everything possible to generate growth. China’s internet sector is home to its largest growth companies and, as such, is conducive to expanding demand and employment, according to Premier Li, KraneShares reported in the China Last Night blog.

The government has also sought feedback from executives on how the government could best support their growth. While Jd.com and PDD The holdings were not present, they sent prepared statements contributing to the dialogue.

Paving the way for more sustainable growth

According to authorities, the recent fines for Tencent and Ant Group complete the regulatory crackdown on the industry. This crackdown has resulted in losses of more than $1.1 trillion in market value for major Chinese technology companies, the Economic Times reported. Valuations for many of the biggest players are still at significantly reduced levels despite strong corporate fundamentals.

The regulations have worked to address a number of problems in the fledgling technology sector. These included anti-monopoly policies and privacy and data protection regulations. While harmful to businesses in the short term, these regulations could help open a longer runway and promote more sustainable growth.

“A solid development of the platform economy is also very important for investors, Zhou Hao, an economist at Guotai Junan International, told ET. The prudent development of platform companies is important for investors’ long-term assessment.

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Image source: China Last Night blog
Image source: China Last Night blog

Internet stocks have already rallied after the announcement of the Ant Group fine and the end of regulatory uncertainty in the sector. Major tech companies such as Tencent, Alibaba and Meituan were among the most traded overnight in Hong Kong, all with big gains.

Capturing growth in China’s Internet industry with KWEB

THE (KWEB extension b) follows the CSI extension Overseas China Internet Index. The index measures the performance of publicly traded companies outside Mainland China operating within the Chinese Internet and Internet related industries. Tencent, Alibaba and Meituan are the fund’s top three holdings as of July 11, 2023.

July 13 KWEB chart

KWEB extension is down 3.51% Current year but exceeded its 200-day simple moving average (SMA extension) on the market today. It’s back above its 50 days SMA extension on July 6, where it remains. Funds that trend higher than both are considered to be within the “buy” territory by investors and trend followers.

The fund includes companies that develop and market software and Internet services. It also tracks companies that provide retail or commercial services over the Internet and those that develop and market mobile software. Also included are companies that produce entertainment and educational software for home use.

KWEB extension provides visibility to the Chinese Internet equivalents of Google, Facebook, Amazon and eBay. All are companies that benefit from China’s growing user base and growing middle class. The fund has worked to convert all possible share classes into Hong Kong stocks instead of ADRs to protect investors from risk.

THE ETFs it has an expense ratio of 0.70% and is worth nearly $5 billion INCREASE.

For more news, information and analysis, please visit China Insights Channel.

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