The KraneShares CSI China Internet ETF (NASDAQ:KWEB) provides exposure to internet companies benefiting from increasing domestic consumption by China's growing middle class, companies that provide services similar to Google (NASDAQ:GOOG), Facebook (NASDAQ:FB), Twitter (NYSE:TWTR), eBay (NASDAQ:EBAY), Amazon (NASDAQ:AMZN), and other American internet giants. When I initially started researching this ETF I was very excited to discover I could invest in this fast-growing sector of the Chinese economy. But I ended up disappointed with KWEB after examining its performance over the last 3 years.
Not only did KWEB underperform the USA-based First Trust DJ Internet Index ETF (NYSEARCA:FDN), but KWEB did not really appreciate much in price at all, very disappointing considering the tremendous growth in Chinese internet use over the last 3 years. One reason for KWEB's lack of performance is the declining worth of the Chinese Yuan as shown below.
The WisdomTree Chinese Yuan Strategy Fund (NYSEARCA:CYB) has dropped in price from $25.50 to $24 in the last 3 years, or approximately 6%. But the falling Yuan does not entirely explain the lack of performance since FDN rose about 43% over the same time period.