Q: Why are Chinese Internet stocks doing so well?
A: When stocks are going straight up, investors start feeling brave. And it's hard to find a corner of the market that takes more nerves than Chinese Internet stocks.
Shares of the KraneShares CSI China Internet ETF is up roughly 8% this year. Chinese Internet stocks are jumping, such as Internet security firm Qihoo 360, Chinese search engine Baidu and online travel site Ctrip.
The rally in the Chinese stocks has two reasons. Investors are on a ravenous search for growth and Chinese Internet stocks have been expanding. Qihoo 360, for instance, saw its revenue more than double last year to $671.1 million last year. And at Baidu, revenue gained 43% last year, blowing away the 19% growth at Google.
But investors are also looking for speculative plays. Shares of Chinese Internet stocks tend to swing by large amounts, so traders are hoping to catch the upswings. Chinese Internet stocks, at least the ones owned by the KraneShares CSI China Internet ETF, have a beta of 1.16, meaning they're more volatile than the market, says Morningstar.
Meanwhile, investors are preparing for what could be the biggest Chinese stock of them all: Alibaba. The Hangzhou, China-based Internet company is in the process of preparing its initial public offering to be listed on a U.S. exchange. The deal, if it goes well, might spur even more interest in the fast-growing Chinese Internet market.
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Follow Matt Krantz on Twitter: @mattkrantz.