Reader Q&A: Which Is A Better ETF From China: CXSE Or KWEB?

As a bonus for my real-time subscribers, I periodically answer user questions that come up in comment threads and messages in a little more depth. These won’t be article-length responses, but think of it more as a lightning round for whatever’s on your mind!

Today’s question (lightly edited for clarity)…

Question: Which is a better ETF from China….CXSE or KWEB?

Answer: The truth is that both of these funds are very highly rated and, given the differences in portfolio composition between them, could probably be used to complement each other.

The WisdomTree China ex-State-Owned Enterprises ETF (CXSE)measures the performance of primarily Chinese large-cap stocks that are not state-owned enterprises. Any company that has government ownership of greater than 20% is excluded from the index. Since the Chinese government is heavily invested in stodgier, more mature companies, such as banks and energy companies, eliminating them from the index tends to produce a more growth-oriented portfolio than what you’d find in broader China ETFs.

The KraneShares CSI China Internet ETF (KWEB) is invested in companies whose primary businesses are in the internet and internet-related sectors. Think of it as the Chinese version of the First Trust Dow Jones Internet Index ETF (FDN). It’s mostly a mix of tech and consumer names, such as Tencent (OTCPK:TCEHY), Alibaba (BABA), Baidu (BIDU) and JD.com (JD). These are the Chinese equivalents of companies, such as Amazon (AMZN), eBay (EBAY) and Alphabet (GOOG).