Chinese Internet Shares On Fire, For How Chinese Internet Shares On Fire, For How Long??

Chinese internet stocks have been on fire, so far, this year, beating their American counterparts by a big margin.

The KraneShares SCI China Internet ETF has soared 65.58%, making it the best performing emerging market ETF.  Big names that are included in the ETF have fared even better. Alibaba Group has gained 102.73%, Sina Corporation 88.10%, and Tencent 84.47%.

Meanwhile the Powershares QQQ shares have gained just 23.31%.

KraneShares SCI China Internet ETF Top 5 Holdings

Company/ETF YTD %Change
KraneShares SCI China Internet ETF 65.58
Alibaba Group 102.73
Sina Corp 88.10
Tencent 84.47
Powershares QQQ 23.31

Source:  10/7/2017

That shouldn’t surprise those who follow China’s online economy, which is the largest and the fastest growing economy in the world, closely. But it should surprise those investors who have been buying into previous rallies of these stocks, and have seen their investments vanish in the aftermath of accounting scandals and heavy-handed government intervention.

The good news for China’s Internet bulls is that things look quite different. Most Internet companies that have posted big gains are profitable. And valuations aren’t as stretched as they were in previous rallies. Tencent’s PE, for instance, is 53.58, Baidu’s 42.92, and Sina’s 28.5. Though,there are exceptions to the rule, like and Tal Education, which trade at astronomical valuations.

KraneShares SCI China Internet ETF Top 10 Holdings

Company PE
Tencent Holdings 53.58
Alibaba Group 60.31
Baidu Inc. 42.92
JD Com Inc.
CTRIP. Com 631.98
Tal Education 112.06
58 Com Inc.
Momo Inc. 40.73
Sina Corp 28.50
Autohome 28.43

While most Chinese internet companies have become profitable, they have become smarter, too climbing into the world’s list of smartest companies — as indicated in a recently published MIT Technology Review’s annual listing which surveys both small and large companies based on their ability to innovate and execute.

Two of these companies that made it to the list this year are Tencent (8th position) and Alibaba 41th.

It’s the second time the two companies made to the list — Tencent (TCEHY) occupied the 15th position in 2015, while Alibaba (BABA) occupied the 4th position.


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