KraneShares Lists China Internet ETF in London, Offering Focused Tech Exposure

The fund, trading under the ticker KWEBI, tracks a benchmark of offshore-listed Chinese internet firms.

The ETF enters the market as China’s digital economy shows continued expansion, with official data reporting 1.125 billion internet users and a rapid surge in artificial intelligence adoption.

ETF Overview and Strategy

The KraneShares CSI China Internet UCITS ETF (ISIN: IE0009ZB3ZX2) is a passively managed fund designed to replicate the performance of the CSI Overseas China Internet Index. The index consists of China-based companies whose primary business is in the internet and internet-related technology sectors, listed on exchanges outside mainland China, such as Hong Kong and the United States.

Key fund details include:

• Total Expense Ratio (TER): 0.75% per annum

• Replication Method: Physical (full replication)

• Distribution Policy: Accumulating

• Fund Domicile: Ireland (UCITS compliant)

• Listings: Available on the London Stock Exchange (USD), Euronext Amsterdam, XETRA, and Borsa Italiana.

The fund’s investment policy states it will invest at least 80% of its net assets in securities of the index or related depositary receipts. It may hold up to 20% of its net asset value in a single index constituent to accurately track the benchmark and does not intend to use financial derivative instruments.

The Investment Case: China’s Internet Economy

The ETF’s strategy is linked to several long-term structural trends within China’s economy.

• Scale of Digital Commerce: China’s retail e-commerce sales reached an estimated $2.1 trillion in 2023, compared to $1.1 trillion in the United States, demonstrating the immense scale of its online consumer market. Online shopping accounted for 32% of total retail purchases in China the same year.

• User Base and Growth Potential: China’s internet user base has grown to 1.125 billion people as of the end of 2025, representing a penetration rate of 80.1%. This suggests a large, established market with room for further growth. For comparison, U.S. internet penetration was reported at approximately 93% in 2023.

• AI-Led Transformation: A significant new driver is the widespread adoption of generative AI. Official reports indicate China had 602 million generative AI users by December 2025, a 141.7% year-on-year increase, with the technology becoming integral to consumer and industrial applications. The core AI industry’s scale was projected to exceed 1.2 trillion yuan ($171.39 billion) in 2025.

• Sector Resilience: Despite macroeconomic headwinds, the internet sector has logged steady revenue growth. Data from January to August 2025 showed major internet companies generated about 1.29 trillion yuan ($181.46 billion) in business revenue, a 2.2% year-on-year increase.

Portfolio Composition and Key Holdings

The ETF offers concentrated exposure to the leaders in China’s digital landscape. The portfolio holds 32 securities, with the top ten holdings comprising approximately 60% of the fund’s net assets.

Sector and Geographic Exposure: The portfolio is heavily weighted toward Consumer Discretionary (41.56%) and Communication Services (33.44%) sectors. Geographically, the fund primarily holds shares listed in Hong Kong (73.5% of assets), with the remainder in U.S.-listed ADRs (American Depositary Receipts). Many U.S.-listed companies, such as Alibaba and NetEase, have secondary listings in Hong Kong, and the fund may hold the Hong Kong-listed shares for optimal exposure.

Performance and Risk Considerations

The fund’s performance is tied to the volatile Chinese technology sector. Past performance shows significant fluctuations.

• Recent and Long-Term Performance: As of February 2026, the fund’s year-to-date daily total return was -0.87%. Over the past five years, it has a cumulative return of -56.29%, reflecting a period of severe downturn for the sector, though it has posted positive returns over the last three years (+5.52%).

• Risk Metrics: The fund exhibits high volatility, with an annualised volatility of 32.35% over the past year. Its maximum drawdown—the peak-to-trough decline—over the past five years was -76.36%.

• Inherent Risks: The prospectus notes that the fund’s passive, index-tracking strategy means the investment manager will not generally consider Sustainability Risks in investment decisions. Investors must also consider risks including geopolitical tensions, regulatory changes within China, currency fluctuations (the fund is USD-denominated and unhedged), and the inherent volatility of technology stocks.

The London listing of the KraneShares CSI China Internet UCITS ETF provides a structured vehicle for gaining targeted exposure to China’s consumer technology and e-commerce sector. The investment thesis is supported by the sheer scale of China’s digital economy and the new growth wave driven by artificial intelligence.