Chinese ETFs jump as choppy recovery continues

Mar. 22, 2022 11:44 AM ETKraneShares CSI China Internet ETF (KWEB), PGJBIDU, BABA, JDBy: Jason Capul, SA News Editor16 Comments

Map of China with Brush Stroke isolated on white background

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Continuing a choppy rally that has marked most of the past week, Chinese exchange traded funds showed substantial strength in midday trading on Tuesday. Investors continue to bargain hunt among Chinese names on signs that the regulatory environment in the country may be shifting towards a more pro-investor stance.

Approaching the midpoint of Tuesday’s trading session, Chinese exchange traded funds led all other funds, with the KraneShares CSI China Internet ETF (NYSEARCA:KWEB) and the Invesco Golden Dragon China Portfolio ETF (NASDAQ:PGJ) taking the top positions. KWEB was +8.4% on the day, and PGJ was +8.3%.

KWEB and PGJ saw strength from gains in their overlapping top 10 holdings, including names like Alibaba (BABA), JD.com (JD), and Baidu (BIDU). These high-profile stocks, which fell dramatically in 2021 and the early part of 2022, have all been told by Chinese regulators to prepare for more audit disclosures -- a move that will provide more transparency for investors.

In addition, Beijing remains supportive of making sure Chinese companies stay listed on U.S. stock exchanges, which has lent support to both ETFs.

The signs of a shift in China's regulatory stance prompted a massive rally in KWEB and PGJ last Wednesday. KWEB staged a one-day advance of nearly 40% on March 16, while PGJ rose about 33%. Since then, the ETFs have seen volatile action with sharp pullbacks alternating with renewed jumps higher.

Daily price action: BIDU +6.2%, BABA +12.1%, JD +5.8%, and TCOM +6.6%.

KWEB has become one of the leading Chinese ETFs with its $5.99B assets under management and is the market's pure-play Chinese tech and internet-based focused fund. The ETF is constructed of 54 holdings and a 0.70% expense ratio.

PGJ, on the other hand, is a broad-cap weighted fund that provides access and exposure to US-listed Chinese stocks across multiple asset classes. However, it is led predominantly by consumer cyclical and communication names. The fund consists of 95 holdings and has a 0.69% expense ratio.

Chinese ETFs continue their climb after KWEB and other funds recently experienced record trade volumes and a massive skyrocket level of performance.

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