The combination of a middling Process Pillar rating and a Low People Pillar rating limit  KraneShares SSE STAR Market 50 ETF to a Morningstar Medalist Rating of Neutral.  The portfolio maintains a cost advantage over competitors, priced within the second-lowest fee quintile among peers.  

 The team managing the passive strategy earns a Low People Pillar. The strategy merits an Average Process Pillar rating.  A high quality exposure means holding stocks that are consistently profitable, growing, and have solid balance sheets. And a low yield exposure is rooted in holding fewer stocks with high dividend or buyback yields -- instead, typically holding stocks in an early stage of development. Even though the strategy's parent organization has some investor-friendly attributes like significant personal investments from managers, a bench of limited-tenure portfolio managers holds it back. As a result, the firm obtains a Low Parent Pillar.

Analyst Rating

Morningstar's evaluation of this security's process aims to determine the likelihood that it will outperform its Morningstar Category benchmark on a risk-adjusted basis over the long term. KraneShares SSE STAR Market 50 ETF earns an Average Process Pillar rating. The main driver of the rating is that this fund tracks an index. Historical data, such as Morningstar's Active/Passive Barometer, finds that passively managed funds have generally outperformed their active counterparts, especially over longer time horizons. Low expenses across its parent firm's funds, whose fees, on average, rank in the second-cheapest quintile of their respective category, also influence the rating. The pattern of low expenses at the firm suggests that it is focused on delivering strong results for investors. Lastly, the process is limited by the parent firm's five-year retention rate of 54%, which suggests it could do more to retain its portfolio managers.

The investment strategy as stated in the fund's prospectus is:  The investment seeks to provide investment results that, before fees and expenses, correspond generally to the price and yield performance of the SSE Science and Technology Innovation Board 50 Index.  Under normal circumstances, and the fund will invest at least 80% of its net assets (plus borrowings for investment purposes) in instruments in its underlying index or in instruments that have economic characteristics similar to those in the underlying index. The underlying index includes the stocks of the top 50 companies by free-float market capitalizations listed on the SSE Science and Technology Innovation Board (the “STAR Board”). It is non-diversified. 

 The portfolio is overweight in technology and industrials relative to the category average by 56.3 and 9.9 percentage points, respectively. The sectors with low exposure compared to category peers are consumer cyclical and financial services, underweight the average by 22.6 and 17.1 percentage points of assets, respectively. The portfolio is composed of 52 holdings and is relatively concentrated. In particular, 50.5% of the fund’s assets are housed within the top 10 holdings, compared with the category’s 36.9% average. And in closing, in terms of portfolio turnover, looking at year-over-year movements, 43% of the fund's holdings have changed, whether through increasing, decreasing, or changing a position.

Average

Process

Kraneshares’s team receives a Low People Pillar rating. The number one detractor from the rating is the turnover of talent across its parent firm. The firm's asset-weighted manager tenure of five years suggests it could do more to retain portfolio managers. The combined average five-year excess return of each manager also limits the team. It shows that the funds they manage have lagged their respective category's average return. The parent firm's five-year success ratio of 50% further holds the team back. The measure indicates the percentage of a firm's funds that survived and outperformed their respective category's median return for the period. The parent's subpar success ratio suggests that the firm could do better across its fund lineup.

People

Kraneshares has a ways to go to become an industry-standard steward, resulting in a Low Parent Pillar rating. Despite the negative rating, an area of strength of the firm is manager investment.  Over 29% of the firm's assets are covered by invested managers, in an effort to align portfolio manager and shareholder interests. Kraneshares's longest-tenured managers do not possess the same experience as management teams at other firms, a detractor from its rating. Specifically, average asset-weighted tenure within the firm is only five years.

Parent

KraneShares SSE STAR Market 50 Index ETF

KSTR tracks an index of the top 50 companies by market-cap that are listed on the Shanghai Stock Exchange (SSE) Science and Technology Innovation Board.

CSOP FTSE China A50 ETF

Xtrackers Harvest CSI 300 China A-Shares ETF

Xtrackers Harvest CSI 500 China A-Shares Small Cap ETF

VanEck China Bond ETF

Global X China Materials ETF

Global X China Consumer ETF

Global X MSCI China Real Estate ETF

Global X MSCI China Utilities ETF

Global X China Financials ETF

VanEck Vectors ChinaAMC SME-ChiNext ETF

iShares MSCI China A ETF

Invesco China Technology ETF

WisdomTree China ex-State-Owned Enterprises Fund

iShares MSCI China Small-Cap ETF

iShares MSCI Hong Kong ETF

iShares MSCI Taiwan ETF

First Trust China AlphaDEX Fund

Franklin FTSE China ETF

Franklin FTSE Hong Kong ETF

Franklin FTSE Taiwan ETF

iShares China Large-Cap ETF

ProShares UltraShort FTSE China 50

SPDR S&P China ETF

KraneShares MSCI All China Index ETF

KraneShares Bosera MSCI China A Share ETF

KraneShares CICC China 5G & Semiconductor Index ETF

Kraneshares MSCI China Environment Index ETF

KraneShares Hang Seng Tech Index ETF

KraneShares MSCI All China Health Care Index ETF

KraneShares CSI China Internet ETF

iShares MSCI China ETF

Invesco Golden Dragon China ETF

Rayliant Quantamental China Equity ETF

Templeton Dragon Fund

ProShares Ultra FTSE China 50

Direxion Daily FTSE China Bear 3X Shares

Direxion Daily FTSE China Bull 3X Shares

ProShares Short FTSE China 50

China's near-term challenges and long-term uncertainties are plentiful, but the widespread pessimism towards the Chinese economy and markets feels excessive.

China's Economy Is Not In A Great Decline But A Great Transition

Xtrackers MSCI China A Inclusion Equity ETF

Xtrackers MSCI All China Equity ETF

KraneShares Bloomberg China Bond Inclusion Index ETF

The PBOC held the 1-year medium-term lending facility (MLF) rate at 2.5% in March. The PBOC remains on a dovish tilt, but depreciation pressure on the RMB limits room for monetary easing in China before global central banks start to cut rates.

PBOC Held Rates Steady In March

Avantis Emerging Markets Equity ETF

Avantis Emerging Markets Value ETF

VanEck Vectors Brazil Small-Cap ETF

Direxion Daily MSCI Brazil Bull 2X Shares

ProShares UltraShort MSCI Brazil Capped

Morgan Stanley China A Share Fund Inc

Direxion Daily CSI 300 China A Share Bull 2X Shares

Xtrackers MSCI Emerging Markets Hedged Equity ETF

Dimensional Emerging Markets Value ETF

Franklin Emerging Market Core

Direxion Daily Emerging Markets Bull 3X Shares

Direxion Daily Emerging Markets Bear 3X Shares

iShares MSCI Emerging Markets ETF

ProShares Ultra MSCI Emerging Markets

ProShares UltraShort MSCI Emerging Markets

Xtrackers Emerging Markets Carbon Reduction and Climate Improvers ETF

Templeton Emerging Markets Fund

Global X Next Emerging & Frontier ETF

iShares MSCI Emerging Markets ex China ETF

WisdomTree India Earnings Fund

iShares MSCI EM ESG Optimized ETF

ProShares Short MSCI Emerging Markets

iShares MSCI Brazil ETF

iShares MSCI Brazil Small-Cap ETF

First Trust Brazil AlphaDEX Fund

First Trust Emerging Markets AlphaDEX Fund

Franklin FTSE Brazil ETF

Franklin FTSE India ETF

iShares MSCI Frontier 100 ETF

Freedom 100 Emerging Markets ETF

iShares Currency Hedged MSCI Emerging Markets ETF

iShares Core MSCI Emerging Markets ETF

Morgan Stanley India Investment Fund Inc

Columbia India Consumer ETF

iShares MSCI India ETF

Nifty India Financials ETF

Direxion Daily MSCI India Bull 2X Shares

iShares India 50 ETF

JPMorgan Emerging Markets Equity Core ETF

iShares ESG MSCI EM Leaders ETF

PIMCO RAFI Dynamic Multi-Factor Emerging Markets Equity ETF

First Trust India NIFTY 50 Equal Weight ETF

Invesco India ETF

First Trust RiverFront Dynamic Emerging Markets ETF

Hartford Multifactor Emerging Markets ETF

Schwab Emerging Markets Equity ETF

iShares MSCI India Small Cap ETF

SPDR Portfolio Emerging Markets ETF

Vanguard FTSE Emerging Markets ETF

WisdomTree Emerging Markets ex-State-Owned Enterprises Fund

Emerging markets continued to expand at a solid pace midway into the first quarter of 2024, supported by broad-based expansion across both manufacturing and service sectors.

Emerging Markets Growth Remains Solid Amid Intensifying Inflationary Pressures

Global X China Biotech Innovation ETF

Global X MSCI China Communication Services ETF

Global X China Energy ETF

Global X MSCI China Health Care ETF

Global X China Industrials

Global X MSCI China Information Technology ETF

Global X MSCI China Consumer Staples ETF

Loncar China Biopharma ETF

iShares MSCI Mexico ETF

Franklin FTSE Latin America ETF

Franklin FTSE Mexico ETF

First Trust Latin America AlphaDEX Fund

iShares Latin America 40 ETF

Direxion Daily MSCI Mexico Bull 3X Shares

China and Hong Kong markets had a humbling 2023 with equities down more than 10%. Beijing has also begun stepping up tourism and travel promotions, granting visa-free entry to 11 countries, with Singapore and Thailand the latest to be included.

Enter The Dragon: Parsing Lunar New Year Opportunities Among Emerging Markets

China's January CPI inflation was weaker than forecast at -0.8% YoY, which marks the lowest level since September 2009. We expect this to mark the bottom of the current cycle.

China: January 2024 CPI Inflation Fell To The Lowest Level Since 2009, Likely To Mark The Bottom

Why China May Need To Do More To Boost Investor Confidence

The Chinese economy is stabilising, but the only fireworks will come from the new year celebrations, which begin on February 11, as momentum remains weak. China's GDP growth for the fourth quarter rose from 4.9% year-on-year to 5.2%, bringing 2023 full-year growth to 5.2% YoY, exceeding the 5% growth target set at last year's Two Sessions.

China Begins Year Of The Dragon With Weak Economic Momentum

While recent policy announcements and data surprises have generated some optimism, we maintain a cautious stance on China's economic prospects. We believe weak consumption trends, a downbeat labor market and continuing property sector headwinds should all weigh on the economy in the coming quarters.

China Growth Could Slow Amid Limited Policy Options

In response to the recent China equity market rout, policymakers vowed last week to stabilize the market through more forceful measures. Despite a very positive initial market reaction (an 8% rebound in three days), deeper fundamental issues such as deflationary risks and lack of demand remain key concerns for China's economy.

China Outlook: Market Rescue Welcomed, But More Needed

China's government is finally moving to stimulate the economy after its sluggish post-COVID reopening.

Restarting China's Economic Growth

Chinese stock prices have lost money in the 16 years since 2007 and are now back near 2005 levels. Chinese treasury bonds have rallied sharply as beaten-up capital capitulates out of riskier markets and back to the relative safety of government bonds.

China Canary Warns About Global Economy And The Downside To Euphoria

Kraneshares China Internet And Covered Call Strategy Etf

iShares MSCI China Multisector Tech ETF

London-based investment research firm Macro Hive highlighted that one of the potential gray swans in 2024 that could rock markets is China, as quoted on Business Insider.

Can China ETF Investing Be a 'Gray Swan' in 2024?

India's potential for economic growth lies in its young population, business-friendly reforms, and technology sectors. To unlock this potential, India needs long-term policies to address structural constraints and short-term infrastructure investments.

Consider This: Is India The New China?

Direxion Daily CSI 300 China A Share Bear 1X Shares

Mainland Chinese economy shows signs of regaining growth momentum in November, with higher output, new orders, and improved business conditions. Business expectations remain below average, leading to job cuts for the third consecutive month.

China PMI Signals Tentative Growth Revival, Prices Edge Higher

Kraneshares China Innovation ETF

While China continues to iron out the wrinkles in economic growth, innovation continues to remain top-of-mind as the country looks to be a global technological powerhouse. That should spur increased interest for exchange-traded funds focused on the country.

Innovation Alongside Recovery Can Boost These China ETFs

China has shown willingness to collaborate with other nations when it comes to establishing global standards on artificial intelligence (AI).

China Agrees to Global Collaboration on Artificial Intelligence

PMI data for October showed momentum in China's economy waned following recent improvements in hard activity data. By industry type, most manufacturing sectors experienced a slowdown in growth in October, though for companies that are heavy consumers of energy, activity actually declined slightly, perhaps affected by recent increases in the prices of crude energy.

China: Momentum Waned In October

China continues to push the boundaries on innovation. This is showing in metrics like the China Innovation Index, which measures the innovation capability for the second largest economy.

China's Innovation Index Continues to Climb Year Over Year

KraneShares CICC China Leaders 100 Index ETF

September's inflation data remind us that despite some firming in activity indicators recently, China's economic recovery remains challenged, and is perhaps behind recent rumours of a slightly more accommodative approach to central government deficits. One month does not constitute a trend, however, and the base effect story, which we believe will slowly lift Chinese inflation over the coming months, is still in play.

China: September Inflation Flirting With Disinflation Again

JPMorgan BetaBuilders Japan ETF

WisdomTree Chinese Yuan Strategy Fund

Xtrackers MSCI Japan Hedged Equity ETF

WisdomTree Japan SmallCap Dividend Fund

WisdomTree Japan Hedged Equity Fund

WisdomTree Japan Hedged SmallCap Equity Fund

iShares MSCI Japan ETF

iShares MSCI Japan Value ETF

First Trust Japan AlphaDEX Fund

Franklin FTSE Japan Hedged ETF

Franklin FTSE Japan ETF

Invesco Currencyshares Japanese Yen Trust

Goldman Sachs ActiveBeta Japan Equity ETF

iShares Currency Hedged MSCI Japan ETF

iShares JPX-Nikkei 400 ETF

iShares MSCI Japan Small-Cap ETF

Invesco DB US Dollar Index Bearish Fund

WisdomTree Bloomberg US Dollar Bullish Fund

Invesco DB US Dollar Index Bullish Fund

ProShares Ultra Yen

ProShares UltraShort Yen

The IMF, the World Bank, and the United Nations all rank China and Japan as the second and third largest economies on the planet. More of what is occurring in the markets should reflect what is happening in China and Japan which are strongly linked economically.

China Could Derail Japan's Fragile Recovery

While China's economy is still struggling, it is at least not getting incrementally worse and there are some pockets of improvement. Exports continue to decline in year-on-year terms, but the rates of decline are decreasing.

How China Is Dodging The Doom Loop

YieldMax AMD Option Income Strategy ETF

Simplify Interest Rate Hedge ETF

In this week's edition of the top-performing ETFs, income and Asia ETFs each saw representatives do well. Income especially stood out, which may owe to investors looking to add some current income ballast to portfolios.

Top Performing ETFs: Income and Asia ETFs Lead

As China accelerates stimulus across multiple sectors, its sluggish economy is showing early signs of recovery, boding well for the A-share market. For most of 2023, sentiment toward China's A-share market has been weak.

China Focus: Are Investors Being Too Pessimistic?

While slower growth in China will impact the global economy and financial markets, we think the short-term pain is necessary to avoid bigger problems down the road. China's economy is in the early stages of a long-term transition away from an export-driven, investment-led model toward a more balanced one with more domestic consumption.

China's Growth Is Slowing: What Does It Mean?

China's goal of self-reliance will certainly rely on innovation. Right now, the second-largest economy sits firmly atop the list of the World Intellectual Property Organization (WIPO) when it comes to innovation on a global scale.

China Sits Firmly Atop Global Innovation Index

News for KraneShares SSE STAR Market 50 Index ETF ETF (KSTR)