Investing in China’s Rebounding Economy: The KLIP Opportunity
China’s economy is predicted to grow by around 5% in 2023, a figure that has been revised up from the previous forecast of 4.7% made in December 2020. While this may seem modest, it is still one of the highest growth rates forecast globally, with the International Monetary Fund estimating global growth at 2.9% in 2023.
The Chinese government is continuing to implement supportive policies for consumers and markets, and the recent restructuring of major technology companies into separate divisions has been viewed positively by the country’s markets. As domestic consumer confidence recovers, the technology sector is expected to benefit the most from a recovering economy and rebounding consumers.
In line with this, the launch of 10 new companies in mainland China, including Shenzhen CECport Technologies, has been well-received. The technology sector is historically more volatile than the US tech sector, which has created income opportunities for investors.
KraneShares China Internet and Covered Call Strategy ETF (KLIP) provides a monthly income by writing options on the KraneShares CSI China Internet ETF, which invests in China’s largest growth companies within the technology sector.
KLIP is benchmarked to the CSI Overseas China Internet Index, which tracks publicly traded Chinese-based internet companies, and can be used in combination with KWEB to capture China’s growth in the internet sector while also benefiting from any volatility in the sector.
With an expense ratio of 0.95%, KLIP has the potential to offer a higher yield than investing in the US or other technology sectors globally.
Overall, China’s economy is expected to continue rebounding incrementally across the year, with supportive policies and a recovering consumer confidence creating positive conditions for growth. The technology sector is expected to remain a key driver of growth, with income opportunities available for investors who choose to invest in this area.
