KWEB tracks the CSI Overseas China Internet Index, which includes China-based companies focused on internet and internet-related technologies. Notable companies in the ETF include Alibaba, Tencent, Meituan, JD.com, PDD, KE Holdings, Trip.com, Full Truck, Baidu, and Vipshop. Last weekâs Equity Leaders Weekly discussed the Chinese market, which has shown significant relative strength and hints of pending moves. Since then, the China Mainland markets, as measured by the Franklin ETF (FLCH), have surged 26.2%, while the Hong Kong market, measured by Franklin's ETF (FLHK), has risen 20.97%, even after a recent pullback. With this substantial rally behind us, itâs essential to assess which investments have emerged as leaders and whether the rally is sustainable or merely a temporary spike. A robust matrix of Chinese ETFs and large companies trading in North America was developed last week to monitor the rally closely. Kraneshares CSI China Internet has emerged as the clear winner, consistent with its status as an outperformer during the previous four-year downturn.
The SIA Matrix Position chart illustrates that KWEB has spent much of its time in the favored (green) zone of the report. Typically, the strongest performers during downturns rebound the fastest, which has been true for the initial phase of the China rally. The point-and-figure chart indicates that a major downtrend line was broken during the summer, allowing the ETF to turn positive after enduring a steep decline from $93.74 to $18.12âan 81% loss. Following a healthy consolidation period, the shares skyrocketed to $38.45 during the recent rally but encountered resistance at this level. Consequently, the share price has experienced volatility, with significant 15% swings reflecting the high growth potential of this market. Support is now at $32.82, with further solid support at $25. Resistance is clearly at $38.45, followed by $50, a significant whole number and prior consolidation level. Given the recent market movements, we've included a clipping from the SIA Custom China Matrix, highlighting the substantial gains over the past month, which likely prompted profit-taking by early investors. Alibaba tops the list, followed closely by Kraneshares China Internet, which holds a large stake in Alibaba. The SMAX column shows consistent scores of 10, indicating that these holdings are outperforming other asset classes, including equities, bonds, commodities, and cash.
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