KraneShares CSI China Internet ETF saw 40% rally after losses

KraneShares CSI China Internet ETF shares rose nearly 40% Wednesday on record trading volume, a big turnaround for the exchange-traded fund whose shares had been battered in recent days amid a selloff in Chinese stocks.

Shares of the $5.1 billion ETF, buoyed by a rally in Chinese stocks, closed at $30.99 Wednesday on the New York Stock Exchange, up from $22.18 on Tuesday, on trading volume of more than 103 million shares. The higher closing price followed a KraneShares webinar Wednesday during which Brendan Ahern, chief investment officer, said investors were selling the fund’s underlying securities for reasons disconnected from company fundamentals.

The ETF traded at $28.45 late Thursday.

KraneShares Chief Operating Officer Jonathan Shelon, who also spoke during the webinar, said the earlier weakness in the ETF’s shares likely presented a buying opportunity.

“We’ve recently witnessed what some would view as the worst technical and sentiment-driven sell-off in KWEB’s nine-year history,” Mr. Shelon said, referring to the ETF by its ticker. “And this past Monday, the 14th, was a record down day, 12%.”

Monday’s selloff came on the heels of losses March 10 and 11, when shares of the ETF saw declines of about 10% each day.

Over the past year, the ETF and its underlying securities have been hurt by a variety of factors, Mr. Ahern said. He cited forced selling in U.S.-listed Chinese stocks linked to the collapse of Archegos Capital Management, implementation of Chinese internet regulation, indiscriminate tax-loss related selling and continued concern over the potential for delistings of U.S.-listed Chinese American depositary receipts after the Securities and Exchange Commission announced how it planned to implement the Holding Foreign Companies Accountable Act, which became law in December 2020.

“More recently, we’ve seen last week the SEC begin the process of identifying U.S. listed Chinese ADRs that are incompliant with the HFCAA,” said Mr. Ahern, who also cited increased US.. political tensions with China linked to Russia’s invasion of Ukraine.

Mr. Ahern called the notion that China could face sanctions similar to those the U.S. has imposed on Russia “a false narrative.” While Russia ultimately is “a very minor player” when it comes to the global economy and financial markets, China is a different situation given its “vast” investments from U.S. investors and corporations, Mr. Ahern said.

“That would very simply cause a global depression,” he said. “I don’t think you can mince words on that.”

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