KraneShares has noted a recent performance uptick of 34.4% (from March 13th until early last week) for Chinese internet stocks and they believe this strong performance can continue because of a couple of macro tailwinds:
Onshore Bull Market. From January to April of this year, total Chinese retail sales of consumer goods rose 10.4% to $1.5 trillion dollars and Chinese consumers may be beginning to spend more confidently as a result of gains they have experienced from the capital markets with some of that spending being done online. National online retail sales of goods and services also grew 40.9% over the same period to reach $168 billion dollars – comprising 11% of total retail sales. KraneShares noted:
We believe the growth in retail sales in China is correlated with the rally in the onshore equity market. China internet and ecommerce companies are becoming the primary beneficiaries of this increase in sales. The onshore bull market’s wealth effect is trickling down to the balance sheets of China’s internet and e-commerce companies.
US-Listed Chinese Stocks Being Included Within MSCI’s Definition of China. Many of the biggest Chinese tech stocks choose to list in the United States to gain a greater international investor base, but this excluded them from the MSCI indices. However, that is set to change with two phases – one beginning in November 2015 followed by second phase in February 2016. KraneShares noted:
We calculated that once U.S-listed Chinese companies are included into these funds there could be an inflow of $10 billion into the fifteen largest U.S-listed Chinese stocks.
Based on our calculations, there could be an additional $66 billion of inflow into these stocks if MSCI benchmarked active managers and institutional investors follow MSCI’s new definition of China.
To read the whole article, Two macro tailwinds that could propel the China internet sector even further, go to the website of KraneShares. In addition, check out our China closed-end fund list and our China ETF list pages.
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