By Doug Busch

When it comes to performance, Chinese internet stocks aren't just keeping up, they are outperforming their U.S. counterparts.

Year to date, the KraneShares CSI China Internet ETF, trading with the ticker KWEB, has surged 21%, easily outpacing the 9% gain from the First Trust Dow Jones Internet Index Fund ( FDN), which counts Amazon.com, Netflix, Meta Platforms, and Alphabet among its top four holdings.

On the technical side, KWEB's chart tells a compelling story. After multiple failures to rise past the $35 level in May and June, the ETF smashed through that resistance with a 4% pop on Tuesday. This breakout above a bull flag pattern sets the stage for a measured move toward $42, a level that could be tested as early as the start of the fourth quarter.

What is catching savvy investors off guard is that it isn't the household names leading KWEB's charge. It is the under-the-radar players.

Companies like Alibaba and JD.com remain soft, trading 22% and 34% below their respective 52-week highs. The real momentum lies with stocks that have already flashed relative strength.

One standout is Bilibili. Over the past year, it has outpaced KWEB, doubling its advance with a 56% gain. Technically, the setup looks enticing: The stock is breaking above a double-bottom pivot, offering a timely entry for those looking to ride the next leg higher.

Tencent Music, KWEB's top holding at 10% of the ETF, has soared 90% year to date with momentum that shows no signs of fading. Round-number theory has played a role: The stock found solid footing at the $10 mark throughout the first and third quarters of 2024 and again this past January, before shedding its "teenage" price tag as it blasted through the $20 level.

With the stock now hovering just 1% below its 52-week high, as the KWEB itself sits 10% off its own peak, bulls are hoping for a healthy pullback toward the $20 zone to reload for the next leg higher.

NetEase is another stock demanding attention. Its shares are up nearly 50% year to date, most of that rally coming in just the past three months. The stock recently broke out above the $110 level, completing a well-formed cup base that began building back in February 2024.

As the saying goes, "the longer the base, the greater the space," meaning breakouts from longer patterns tend to be more reliable and powerful. With momentum on its side, NetEase could be setting its sights on the $145 level in the near term. It offers an attractive dividend yield north of 2%, giving growth-minded investors a bit of cushion along the way.

Write to Doug Busch at douglas.busch@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

July 17, 2025 14:03 ET (18:03 GMT)

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