November 20, 2025 • 18 mins
n this episode of Lead-Lag Live, I sit down with Brendan Ahern, Chief Investment Officer at KraneShares, to break down the pivotal shift happening inside China’s equity markets. A Trump–Xi truce, policy stabilization, and a surge in cloud and AI revenues are driving fresh optimism into Chinese tech — and Brendan explains why global investors are quietly reallocating back into KWEB.
From improving CPI and government action on involution to cloud-driven AI monetization, semiconductor risks, and the new wave of international inflows, Brendan lays out the forces reshaping China’s market narrative after years of pessimism.
In this episode:
– Why China’s cloud and AI revenue growth is outpacing expectations
– How anti-involution policy is stabilizing competition and lifting margins
– Why global investors — especially Europe and Asia — are rotating back into China
– Where KWEB sees opportunity across online video, entertainment, and emerging tech
– Why semiconductor valuations demand caution despite the broader tech rebound
– How the Trump–Xi détente may open the door to further policy normalization
Lead-Lag Live brings you inside conversations with the financial thinkers who shape markets. Subscribe for interviews that go deeper than the noise.
#LeadLagLive #KWEB #KraneShares #ChinaTech #AI #EmergingMarkets #Investing #Markets
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
SPEAKER_00 (00:36):
In terms of an AI opportunity set in China, it is
the cloud computing players thatcompanies like Badu with its
ErnieBot large language model,and in the case of Ali Bob, it's
called QAn, they're basicallygiving it away for free.
It's open source.
You know, in China, they kind ofrecognize that anyone can build
a large language model.
(00:56):
There's no moat.
The opportunity is in cloudcomputing, so they're actually
literally giving it away forfree.
SPEAKER_01 (01:16):
Welcome to Lead Lag Live.
China's equity market isentering a pivotal phase.
A recent meeting betweenPresident Trump and President Xi
in South Korea led to a one-yearsuspension of multiple tariffs
and export controls, along withChina resuming U.S.
soybean purchases.
A significant step that'sboosted sentiment in both
markets.
(01:37):
At the same time, AI andsemiconductor innovation, policy
stimulus, and improvingcorporate earnings are driving a
new wave of optimism for Chinesetech and internet stocks.
My guest today is Brendan Ahern,Chief Investment Officer at
Crane Shares and one of the mostrespected voices on China's
markets and ETF investing.
(01:58):
Brendan, it's great to have youhere again.
SPEAKER_00 (02:00):
Yeah, likewise, Melanie.
Thank you for the opportunity.
SPEAKER_01 (02:03):
So let's start with earnings.
Internet and technologycompanies in China have
outperformed expectations thisquarter with cloud and AI
revenues leading the way.
What's your outlook for uh Q3earnings among the major
China-based internet mains?
And do you think that strengthis sustainable into 2026?
SPEAKER_00 (02:20):
Yeah, I mean, really the strong performance of
Chinese equities, particularlygrowth equities like we're
invested in with K Web or ChinaInternet ETF.
It's really been multipleexpansion.
And certainly the earningsfront, as we go into Q3, we know
that e-commerce players likeAlibaba, JD, and Medouan,
(02:41):
they're facing the headwind ofvery, very light domestic
consumption in China.
Also the headwind of very fiercecompetition.
At the same time, there's somereally areas of opportunities in
terms of online uh video.
Uh companies like Billy Billy,Quashu.
(03:01):
Uh, one of the stars thus farthat's reported is uh online
music provider, Tencent MusicEntertainment.
Online gaming's been a great uhspot for companies like Ten Cent
as well as Netties.
Um and again, so so part of partof what we offer in K-Web is a
pretty diversified approachacross, you know, almost uh 30
(03:24):
names, but uh across a wholedifferent types of different
subsectors.
And those different subsectorsare kind of like, you know, they
they they're moving at differentspeeds at different times.
And as much as Alibaba, it'sprobably you know the biggest,
one of the biggest names in thespace, one of the names people
gravitate to, it's it's reallystruggled on the domestic
(03:45):
e-commerce space.
Obviously, their cloudcomputing, which is really
driven by AI, has been one ofthe standout areas within the
companies.
But again, you know, that that'spart of the diversified approach
we have in K Web.
And again, domestic consumptionis a little bit tougher, but
some of the other areas we dosee some opportunities.
SPEAKER_01 (04:02):
Okay, so what about involution?
I mean, you've talked about thatbefore, Renan, hyper competitive
cycle we saw in e-commerce.
Do you think that phase hasfinally peaked?
And how has the governmentpolicy played into stabilizing
the sector?
SPEAKER_00 (04:15):
Yeah, certainly we saw this uh anti-involution,
this campaign to look at excesscompetition, overcapacity, as
well as excess competition backin July.
I think where where we've seenthe initial efforts really
coming to fruition is in some ofthe solar companies that that
that two of the global leadersin solar panel manufacturing,
(04:38):
Tonghwei and Longye GreenEnergy, they have a lot of top
uh top line revenue, but theyactually don't make money
because there's so muchcompetition.
Because we've seen thegovernment curtail production,
uh, these companies, as theyreported their Q3 financial
results, they dramaticallyreduced their losses.
(05:00):
And again, this is just thefirst little taste of this
anti-involution in solar.
The other place we're seeingthis pan out, Melanie, is uh the
October CPI in China wasactually turned positive.
And uh we China's been stuck ina little bit of a deflationary
spiral uh because of things likeexcess competition, light
(05:21):
domestic consumption, but CPIactually turned positive.
And yes, it's one month, butagain, we're just seeing green
shoots, and certainly e-commerceis an area we're seeing a lot of
competition.
We've seen the government onlystart to pivot to address this.
And why?
Well, certainly uh the 15thfive-year plan talks a lot about
(05:45):
domestic consumption of becomingself-reliant, uh, certainly in
science, technology, but also inuh domestic consumption making,
making themselves a little lessdependent upon export-driven
manufacturing.
So again, green shoots, earlydays, uh, but something that we
think is underappreciated in themarket.
SPEAKER_01 (06:02):
Yeah.
So, Brandy, that leads me to mynext uh question.
For investors who are looking atallocations right now, what
segments specifically of theChina market do you find most
attractive for the remainder ofthis year?
And are there any areas that youwould avoid?
SPEAKER_00 (06:16):
Yeah, I think I think one, we're seeing um
investors globally coming backinto China and and and
particularly amongst non-USinvestors, that a lot of
European investors, uh,particularly in Switzerland,
because of the Euro and Swissfrancs appreciation versus the
(06:36):
dollar, they're not making a lotof money in US equities.
And so we see this rebalancingeffect taking place in Europe.
In Asia, uh, a lot of thoseinvestors, particularly
institutionally, uh theireconomy is so geared to China.
As we see in the export numbers,you know, China's largest
trading partner is ASEAN.
(06:57):
So, um, and then obviously thecommodity world, like, you know,
a company like Ballet in Brazilor BHP in Australia, uh, these
very large companies are veryfollowed by institutional
investors locally.
And they see those companies aredoing really well in China.
So we're seeing this globalrebalance taking place.
(07:20):
And where is that money gonna gowithin China?
Uh, it's gonna go to growthstocks.
I mean, I mean, investors lookto EM for growth, and China has
a whole host of cheap China techcompanies that are on sale that
we own in K Web.
Now, now, within China Tech, anarea that that we recommend a
(07:40):
little caution is on, a lot ofthe semiconductor stocks in
China, very, very highvaluations.
And I think we're seeing somerecent weakness just because
investors are worried, you know,can these domestic chip
providers, can they really liveup to exceedingly high
expectations?
And we've had a few misses fromQ3 earnings space.
(08:03):
So, so within the broader Chinatech space, you really got to be
a little careful because of uhsome of the exceedingly high
semiconductor valuations inChina today.
SPEAKER_01 (08:15):
Yeah.
So I speaking specifically thenabout Alibaba and Beidu both saw
cloud revenue growth faroutpacing the overpaw overall
performance.
Do you think this signals astructural shift then in where
China's tech sector growth isgoing to come from over the next
few years, given what you'vesaid about the semiconductor
things?
SPEAKER_00 (08:33):
Yeah, it's it's it's interesting.
You know, you're in terms of anAI opportunity set in China, it
it is the cloud computingplayers that that companies like
Badu with its ErnieBot, it'slarge language model, and in the
case of Alibab, it's called QAn.
Um, they're basically giving itaway for free.
It's open source.
(08:53):
It's it's very different thanwhat you're seeing from, say,
USAI players, um, whether youknow, you know, if it's open AI,
anthropic perplexity, et cetera.
You know, in China, they kind ofrecognize that, well, anyone can
build a large language model.
There's no mode.
The opportunity is in cloudcomputing.
(09:13):
So they're actually literallygiving it away for free.
Um, and we saw from uh inAugust, the previous quarter,
you know, in the case of ofAlibaba, you know, it was only
13.5% of their revenue, but itgrew 26%.
I'm talking about the cloud.
In the case of Badu, it was 20%of revenue, grew at 27%.
(09:37):
In the case of Tencent, it wasuh coincidentally 10% of
revenue, but it grew 15%.
So we do really see this cloudcomputing as the way to monetize
AI.
And uh Stanford University hasan AI index where they actually
track global AI players.
And certainly, you know, we wedon't look at it as a race
(10:00):
between the US and China.
U.S.
is ahead, but in some of thecategories, Chinese companies
are actually ahead of their U.S.
equivalents.
The big difference is these arenot unicorns.
These are companies that you caninvest in today, and they're
actually at uh reasonablevaluations uh relative to what
we're seeing in some of the USAIplays.
SPEAKER_01 (10:19):
Yeah, so I think we've talked a little bit about
some of the larger holdingswithin K Web.
What are some of the smaller uhcompanies that K Web has
allocated into where you seesignificant growth or that
investors uh should be taking alook at within within the ETA?
SPEAKER_00 (10:33):
Yeah, it's it's it's a great question, Million,
because I think, you know, timeand again we see investors say,
okay, uh I get what you'resaying.
I'm just gonna go by Alibaba.
And as much as we're believersin the company, uh, we do think
that the company faces a littlebit of a challenge because of
the domestic consumptionsituation in China continues to
be pretty tough going uh becauseof the real estate crisis,
(10:56):
precipitous fall, and urbanhousehold wealth allocated to
housing.
Uh so e-commerce is an areawe've actually kind of been uh
we'd recommend almost anunderweight, so to speak.
Uh I mentioned Ten Cent Music,which really delivered some
outstanding results.
Uh, but other players in thespace that I'd be watching are
Billy Billy and Kuashu.
(11:17):
These are online videocompanies.
Uh, Billy Billy really geared togamers.
Um, and then Kuashu, it's almostlike a TikTok.
It's a short video platform.
These are very, very popularacross uh in China.
They're actually going global aswell.
Kuashu's actually set up shop inBrazil.
(11:38):
Uh, but those are really underthe radar.
And I think the nice thing isabout a K Web is those names are
going to be very volatile.
I think, particularly for aninvestment professional, you'd
be very nervous holding a stockthat has such a exceedingly high
standard deviation.
But that's the benefit of K-Web.
We can hold that for you, holdit in a diversified manner.
(12:00):
So, so again, uh really onlinevideo, online entertainment is
an area we really like.
Um, and certainly, again, youknow, it's nothing against Ali
Bob and uh the e-commerceplayers, it's it's a real
opportunity in the long run.
We're just saying in the shortterm they face some challenges.
SPEAKER_01 (12:16):
So then, you know, I I wouldn't take a step back to
sort of the macro uh economicoutlook right now, but given the
thought in US-China relationsfollowing the Trump Shi meeting,
and I know you've been over intothe sort of area recently.
How might global investorsrethink their approach to
Chinese equities as a whole?
And what should they keep inmind about uh the potential
(12:36):
policy reversals with PresidentTrump leading the US and new
trade developments?
SPEAKER_00 (12:42):
Yeah, and I think I think we're seeing this
re-rating of Chinese equitiesreally being driven by non-US
investors that that again, a lota lot of those global investors,
one, they're potentiallyrebalancing some of their US
positions because of valuationconcerns or currency
deappreciation.
Uh, but I think also just on anabsolute basis, they're seeing
(13:02):
inexpensive valuation and in theK Web name.
So um in the US, it's it's it isa little bit tougher because the
geopolitical, the medianarrative remains so negative.
But we really do believe thatPresident Trump uh has done this
truce, this detente uh withPresident Xi.
That will arguably lead tofurther conversations,
(13:24):
potentially a state, a statetrip to China from President
Trump.
And certainly the RepublicanParty will follow whatever
President Trump dictates becausehe is ultimately the El Jefe,
the big boss of the RepublicanParty.
And so I think they'll fall inline or potentially suffer the
consequence, which you know,certainly you're either with
Trump or against him.
(13:45):
And I think the Republican Partywill fall in line as he does
more deals on the China side.
So U.S.
investors, because of thiscontinuing negative uh media
narrative, have been very slowto allocate.
Again, you know, you know, we'reoutperforming the S P 500
significantly on a year-to-datebasis, even more significantly
(14:06):
when this rally started back inJanuary of 2024.
So we're really constructive onmoney getting pulled off of the
sidelines back into Chineseequities because of this
outperformance.
It's just in the US, thenarrative, the media narrative
has been so negative that Ithink a lot of investors are
still on their sidelines, butit's just gonna get increasingly
(14:29):
harder to ignore.
SPEAKER_01 (14:30):
Yeah, and Brendan, just finally, for anyone
watching who wants to learn moreabout craneshares, explore
specifically the K Web, find orread more about your research.
Where's the best way for them togo?
SPEAKER_00 (14:39):
Yeah, I mean, certainly craneshares.com or
craneshares backslash K Web isuh you know, where you can find
out uh we publish a lot of our KWeb specific research, our
presentations.
And then uh I read a dailyresearch blog called
Chinalastnight.com, where uh welook at what we think is the
important things that happenedin China overnight, things that
(15:00):
you're not gonna read fromtraditional US media sources,
which are perpetually negativeon China.
Um and so again, it it's it's abalanced, data-driven
perspective on what's happeningthere on a daily basis, not
simply Chinalastnight.com.
SPEAKER_01 (15:14):
Just like throwing it out there from left side, but
what are your thoughts on the uhnews that China is developing a
drug that will let people liveuntil they're 150?
SPEAKER_00 (15:25):
Well, I that that, you know, I mean, personally, I
I hope so.
Uh you know, out of my ownself-preservation.
Um I think I think it'sinteresting.
One of the one of the uh one ofthe areas we're seeing really
strong performance uh acrossChinese equities.
Um, A, you obviously have the KWeb companies, uh clean
(15:47):
technology, you know, again, youknow, we we have K-green.
Uh part of that's driven by veryinexpensive electricity in China
because of the high amount ofrenewables and solar, wind,
nuclear, and hydro.
So people haven't really thoughtabout clean tech as an AI play.
And the other one is healthcare.
(16:09):
And a lot of that is because alot of the biotech companies in
China are adopting AI verysignificantly.
You know, you know, in China,there's no liberal arts
graduates.
People are STEM graduates.
And so you've had this policy,this emphasis on STEM education
for decades.
(16:30):
And you're seeing that thatinvestment pay dividends.
And you see it in in AI and inindustrial manufacturing.
But biotech, I think, is an areawhere increasingly we see a lot
of global uh pharmaceuticalcompanies doing deals with uh
Chinese biotech companiesbecause they're doing very
(16:52):
innovative drug sales.
So, so you know, again, I think,I think, you know, we're seeing
some really interestingdevelopments.
Actually, there's a big Chineseplayer.
They're uh going to be launchingtheir lung cancer drug globally
through um a U.S.
pharmaceutical company, a realopportunity again.
Um, and and you know, the soonerthe better.
You know, you know, we canpreserve life.
(17:13):
I don't think anyone should careif it's China, the US, or
Switzerland or Canada, wherewherever.
We'll take it.
SPEAKER_01 (17:19):
Absolutely.
Well, Brandon, thanks again forjoining me, and thanks to
everyone for watching.
Be sure to like, share, andsubscribe for more episodes of
Lead Light Live.
In terms of an AI opportunity set in China, it is
the cloud computing players thatcompanies like Badu with its
ErnieBot large language model,and in the case of Ali Bob, it's
called QAn, they're basicallygiving it away for free.
It's open source.
You know, in China, they kind ofrecognize that anyone can build
a large language model.
(00:56):
There's no moat.
The opportunity is in cloudcomputing, so they're actually
literally giving it away forfree.
SPEAKER_01 (01:16):
Welcome to Lead Lag Live.
China's equity market isentering a pivotal phase.
A recent meeting betweenPresident Trump and President Xi
in South Korea led to a one-yearsuspension of multiple tariffs
and export controls, along withChina resuming U.S.
soybean purchases.
A significant step that'sboosted sentiment in both
markets.
(01:37):
At the same time, AI andsemiconductor innovation, policy
stimulus, and improvingcorporate earnings are driving a
new wave of optimism for Chinesetech and internet stocks.
My guest today is Brendan Ahern,Chief Investment Officer at
Crane Shares and one of the mostrespected voices on China's
markets and ETF investing.
(01:58):
Brendan, it's great to have youhere again.
SPEAKER_00 (02:00):
Yeah, likewise, Melanie.
Thank you for the opportunity.
SPEAKER_01 (02:03):
So let's start with earnings.
Internet and technologycompanies in China have
outperformed expectations thisquarter with cloud and AI
revenues leading the way.
What's your outlook for uh Q3earnings among the major
China-based internet mains?
And do you think that strengthis sustainable into 2026?
SPEAKER_00 (02:20):
Yeah, I mean, really the strong performance of
Chinese equities, particularlygrowth equities like we're
invested in with K Web or ChinaInternet ETF.
It's really been multipleexpansion.
And certainly the earningsfront, as we go into Q3, we know
that e-commerce players likeAlibaba, JD, and Medouan,
(02:41):
they're facing the headwind ofvery, very light domestic
consumption in China.
Also the headwind of very fiercecompetition.
At the same time, there's somereally areas of opportunities in
terms of online uh video.
Uh companies like Billy Billy,Quashu.
(03:01):
Uh, one of the stars thus farthat's reported is uh online
music provider, Tencent MusicEntertainment.
Online gaming's been a great uhspot for companies like Ten Cent
as well as Netties.
Um and again, so so part of partof what we offer in K-Web is a
pretty diversified approachacross, you know, almost uh 30
(03:24):
names, but uh across a wholedifferent types of different
subsectors.
And those different subsectorsare kind of like, you know, they
they they're moving at differentspeeds at different times.
And as much as Alibaba, it'sprobably you know the biggest,
one of the biggest names in thespace, one of the names people
gravitate to, it's it's reallystruggled on the domestic
(03:45):
e-commerce space.
Obviously, their cloudcomputing, which is really
driven by AI, has been one ofthe standout areas within the
companies.
But again, you know, that that'spart of the diversified approach
we have in K Web.
And again, domestic consumptionis a little bit tougher, but
some of the other areas we dosee some opportunities.
SPEAKER_01 (04:02):
Okay, so what about involution?
I mean, you've talked about thatbefore, Renan, hyper competitive
cycle we saw in e-commerce.
Do you think that phase hasfinally peaked?
And how has the governmentpolicy played into stabilizing
the sector?
SPEAKER_00 (04:15):
Yeah, certainly we saw this uh anti-involution,
this campaign to look at excesscompetition, overcapacity, as
well as excess competition backin July.
I think where where we've seenthe initial efforts really
coming to fruition is in some ofthe solar companies that that
that two of the global leadersin solar panel manufacturing,
(04:38):
Tonghwei and Longye GreenEnergy, they have a lot of top
uh top line revenue, but theyactually don't make money
because there's so muchcompetition.
Because we've seen thegovernment curtail production,
uh, these companies, as theyreported their Q3 financial
results, they dramaticallyreduced their losses.
(05:00):
And again, this is just thefirst little taste of this
anti-involution in solar.
The other place we're seeingthis pan out, Melanie, is uh the
October CPI in China wasactually turned positive.
And uh we China's been stuck ina little bit of a deflationary
spiral uh because of things likeexcess competition, light
(05:21):
domestic consumption, but CPIactually turned positive.
And yes, it's one month, butagain, we're just seeing green
shoots, and certainly e-commerceis an area we're seeing a lot of
competition.
We've seen the government onlystart to pivot to address this.
And why?
Well, certainly uh the 15thfive-year plan talks a lot about
(05:45):
domestic consumption of becomingself-reliant, uh, certainly in
science, technology, but also inuh domestic consumption making,
making themselves a little lessdependent upon export-driven
manufacturing.
So again, green shoots, earlydays, uh, but something that we
think is underappreciated in themarket.
SPEAKER_01 (06:02):
Yeah.
So, Brandy, that leads me to mynext uh question.
For investors who are looking atallocations right now, what
segments specifically of theChina market do you find most
attractive for the remainder ofthis year?
And are there any areas that youwould avoid?
SPEAKER_00 (06:16):
Yeah, I think I think one, we're seeing um
investors globally coming backinto China and and and
particularly amongst non-USinvestors, that a lot of
European investors, uh,particularly in Switzerland,
because of the Euro and Swissfrancs appreciation versus the
(06:36):
dollar, they're not making a lotof money in US equities.
And so we see this rebalancingeffect taking place in Europe.
In Asia, uh, a lot of thoseinvestors, particularly
institutionally, uh theireconomy is so geared to China.
As we see in the export numbers,you know, China's largest
trading partner is ASEAN.
(06:57):
So, um, and then obviously thecommodity world, like, you know,
a company like Ballet in Brazilor BHP in Australia, uh, these
very large companies are veryfollowed by institutional
investors locally.
And they see those companies aredoing really well in China.
So we're seeing this globalrebalance taking place.
(07:20):
And where is that money gonna gowithin China?
Uh, it's gonna go to growthstocks.
I mean, I mean, investors lookto EM for growth, and China has
a whole host of cheap China techcompanies that are on sale that
we own in K Web.
Now, now, within China Tech, anarea that that we recommend a
(07:40):
little caution is on, a lot ofthe semiconductor stocks in
China, very, very highvaluations.
And I think we're seeing somerecent weakness just because
investors are worried, you know,can these domestic chip
providers, can they really liveup to exceedingly high
expectations?
And we've had a few misses fromQ3 earnings space.
(08:03):
So, so within the broader Chinatech space, you really got to be
a little careful because of uhsome of the exceedingly high
semiconductor valuations inChina today.
SPEAKER_01 (08:15):
Yeah.
So I speaking specifically thenabout Alibaba and Beidu both saw
cloud revenue growth faroutpacing the overpaw overall
performance.
Do you think this signals astructural shift then in where
China's tech sector growth isgoing to come from over the next
few years, given what you'vesaid about the semiconductor
things?
SPEAKER_00 (08:33):
Yeah, it's it's it's interesting.
You know, you're in terms of anAI opportunity set in China, it
it is the cloud computingplayers that that companies like
Badu with its ErnieBot, it'slarge language model, and in the
case of Alibab, it's called QAn.
Um, they're basically giving itaway for free.
It's open source.
(08:53):
It's it's very different thanwhat you're seeing from, say,
USAI players, um, whether youknow, you know, if it's open AI,
anthropic perplexity, et cetera.
You know, in China, they kind ofrecognize that, well, anyone can
build a large language model.
There's no mode.
The opportunity is in cloudcomputing.
(09:13):
So they're actually literallygiving it away for free.
Um, and we saw from uh inAugust, the previous quarter,
you know, in the case of ofAlibaba, you know, it was only
13.5% of their revenue, but itgrew 26%.
I'm talking about the cloud.
In the case of Badu, it was 20%of revenue, grew at 27%.
(09:37):
In the case of Tencent, it wasuh coincidentally 10% of
revenue, but it grew 15%.
So we do really see this cloudcomputing as the way to monetize
AI.
And uh Stanford University hasan AI index where they actually
track global AI players.
And certainly, you know, we wedon't look at it as a race
(10:00):
between the US and China.
U.S.
is ahead, but in some of thecategories, Chinese companies
are actually ahead of their U.S.
equivalents.
The big difference is these arenot unicorns.
These are companies that you caninvest in today, and they're
actually at uh reasonablevaluations uh relative to what
we're seeing in some of the USAIplays.
SPEAKER_01 (10:19):
Yeah, so I think we've talked a little bit about
some of the larger holdingswithin K Web.
What are some of the smaller uhcompanies that K Web has
allocated into where you seesignificant growth or that
investors uh should be taking alook at within within the ETA?
SPEAKER_00 (10:33):
Yeah, it's it's it's a great question, Million,
because I think, you know, timeand again we see investors say,
okay, uh I get what you'resaying.
I'm just gonna go by Alibaba.
And as much as we're believersin the company, uh, we do think
that the company faces a littlebit of a challenge because of
the domestic consumptionsituation in China continues to
be pretty tough going uh becauseof the real estate crisis,
(10:56):
precipitous fall, and urbanhousehold wealth allocated to
housing.
Uh so e-commerce is an areawe've actually kind of been uh
we'd recommend almost anunderweight, so to speak.
Uh I mentioned Ten Cent Music,which really delivered some
outstanding results.
Uh, but other players in thespace that I'd be watching are
Billy Billy and Kuashu.
(11:17):
These are online videocompanies.
Uh, Billy Billy really geared togamers.
Um, and then Kuashu, it's almostlike a TikTok.
It's a short video platform.
These are very, very popularacross uh in China.
They're actually going global aswell.
Kuashu's actually set up shop inBrazil.
(11:38):
Uh, but those are really underthe radar.
And I think the nice thing isabout a K Web is those names are
going to be very volatile.
I think, particularly for aninvestment professional, you'd
be very nervous holding a stockthat has such a exceedingly high
standard deviation.
But that's the benefit of K-Web.
We can hold that for you, holdit in a diversified manner.
(12:00):
So, so again, uh really onlinevideo, online entertainment is
an area we really like.
Um, and certainly, again, youknow, it's nothing against Ali
Bob and uh the e-commerceplayers, it's it's a real
opportunity in the long run.
We're just saying in the shortterm they face some challenges.
SPEAKER_01 (12:16):
So then, you know, I I wouldn't take a step back to
sort of the macro uh economicoutlook right now, but given the
thought in US-China relationsfollowing the Trump Shi meeting,
and I know you've been over intothe sort of area recently.
How might global investorsrethink their approach to
Chinese equities as a whole?
And what should they keep inmind about uh the potential
(12:36):
policy reversals with PresidentTrump leading the US and new
trade developments?
SPEAKER_00 (12:42):
Yeah, and I think I think we're seeing this
re-rating of Chinese equitiesreally being driven by non-US
investors that that again, a lota lot of those global investors,
one, they're potentiallyrebalancing some of their US
positions because of valuationconcerns or currency
deappreciation.
Uh, but I think also just on anabsolute basis, they're seeing
(13:02):
inexpensive valuation and in theK Web name.
So um in the US, it's it's it isa little bit tougher because the
geopolitical, the medianarrative remains so negative.
But we really do believe thatPresident Trump uh has done this
truce, this detente uh withPresident Xi.
That will arguably lead tofurther conversations,
(13:24):
potentially a state, a statetrip to China from President
Trump.
And certainly the RepublicanParty will follow whatever
President Trump dictates becausehe is ultimately the El Jefe,
the big boss of the RepublicanParty.
And so I think they'll fall inline or potentially suffer the
consequence, which you know,certainly you're either with
Trump or against him.
(13:45):
And I think the Republican Partywill fall in line as he does
more deals on the China side.
So U.S.
investors, because of thiscontinuing negative uh media
narrative, have been very slowto allocate.
Again, you know, you know, we'reoutperforming the S P 500
significantly on a year-to-datebasis, even more significantly
(14:06):
when this rally started back inJanuary of 2024.
So we're really constructive onmoney getting pulled off of the
sidelines back into Chineseequities because of this
outperformance.
It's just in the US, thenarrative, the media narrative
has been so negative that Ithink a lot of investors are
still on their sidelines, butit's just gonna get increasingly
(14:29):
harder to ignore.
SPEAKER_01 (14:30):
Yeah, and Brendan, just finally, for anyone
watching who wants to learn moreabout craneshares, explore
specifically the K Web, find orread more about your research.
Where's the best way for them togo?
SPEAKER_00 (14:39):
Yeah, I mean, certainly craneshares.com or
craneshares backslash K Web isuh you know, where you can find
out uh we publish a lot of our KWeb specific research, our
presentations.
And then uh I read a dailyresearch blog called
Chinalastnight.com, where uh welook at what we think is the
important things that happenedin China overnight, things that
(15:00):
you're not gonna read fromtraditional US media sources,
which are perpetually negativeon China.
Um and so again, it it's it's abalanced, data-driven
perspective on what's happeningthere on a daily basis, not
simply Chinalastnight.com.
SPEAKER_01 (15:14):
Just like throwing it out there from left side, but
what are your thoughts on the uhnews that China is developing a
drug that will let people liveuntil they're 150?
SPEAKER_00 (15:25):
Well, I that that, you know, I mean, personally, I
I hope so.
Uh you know, out of my ownself-preservation.
Um I think I think it'sinteresting.
One of the one of the uh one ofthe areas we're seeing really
strong performance uh acrossChinese equities.
Um, A, you obviously have the KWeb companies, uh clean
(15:47):
technology, you know, again, youknow, we we have K-green.
Uh part of that's driven by veryinexpensive electricity in China
because of the high amount ofrenewables and solar, wind,
nuclear, and hydro.
So people haven't really thoughtabout clean tech as an AI play.
And the other one is healthcare.
(16:09):
And a lot of that is because alot of the biotech companies in
China are adopting AI verysignificantly.
You know, you know, in China,there's no liberal arts
graduates.
People are STEM graduates.
And so you've had this policy,this emphasis on STEM education
for decades.
(16:30):
And you're seeing that thatinvestment pay dividends.
And you see it in in AI and inindustrial manufacturing.
But biotech, I think, is an areawhere increasingly we see a lot
of global uh pharmaceuticalcompanies doing deals with uh
Chinese biotech companiesbecause they're doing very
(16:52):
innovative drug sales.
So, so you know, again, I think,I think, you know, we're seeing
some really interestingdevelopments.
Actually, there's a big Chineseplayer.
They're uh going to be launchingtheir lung cancer drug globally
through um a U.S.
pharmaceutical company, a realopportunity again.
Um, and and you know, the soonerthe better.
You know, you know, we canpreserve life.
(17:13):
I don't think anyone should careif it's China, the US, or
Switzerland or Canada, wherewherever.
We'll take it.
SPEAKER_01 (17:19):
Absolutely.
Well, Brandon, thanks again forjoining me, and thanks to
everyone for watching.
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