Cheap China Internet Stocks Are About to Hit a Turning Point
Chinese internet stocks maintain relatively low valuations compared to their global counterparts, although the outlook is becoming more positive. Earnings have been recovering and growth in areas such as AI is offering a more positive outlook. However, market sentiment is still affected by existing concerns. If confidence were to shift, the gap between current prices and underlying fundamentals could begin to narrow over time.
The KraneShares CSI China Internet ETF (KWEB) has been one of the most unloved trades in the past five years. It peaked in February 2021 at over $105 during the post-COVID tech mania, then spent the next two years getting cut in half, then in half again. It now trades under $30. Beijing’s regulatory crackdown wiped out hundreds of billions in market cap across Alibaba (BABA), Tencent (TCEHY), JD.com (JD), and the rest of the Chinese internet complex. 2025 brought a partial rehabilitation as the Hong Kong-listed names rallied on AI optimism around DeepSeek and a softer regulatory tone from the CCP, but 2026 has been ugly; risk peaked in October for Chinese tech stocks as much as it did for U.S. tech stocks. KWEB has just rejected off a retest of its 50-EMA in what looks like a textbook bearish continuation pattern. The setup is interesting because the fundamental case for Chinese tech stocks is the strongest it has been in years, and they are trading like nobody wants the earnings. That gap between fundamentals and price is exactly the kind of thing that resolves violently in the end. I’m betting we’re nearing a turning point.