Cathie Wood, chief executive officer of ARK Investment Management.
Alex Flynn/BloombergARK Invest’s Cathie Wood continued to exit Chinese stocks this week as Beijing’s crackdown on the tutoring industry caused sharp swings in the nation’s stocks market.
According to the company’s website, ARK’s largest fund, the $22.4 billion ARK Innovation (ticker: ARKK), has exited nearly all its positions in Chinese stocks as of Wednesday, except for a $1 million holding in real estate services company KE Holdings (BEKE). This is down from an 8% allocation to China stocks in February, according to Morningstar data.
ARK funds have been shedding Chinese stocks consistently over the past few weeks as Chinese regulators stepped up measures against the nation’s internet giants—including Alibaba Group Holding (BABA) and Didi Global (DIDI)—over antitrust and cybersecurity issues.
This past week, private tutoring companies became the latest targets of Chinese regulators when they were ordered to become nonprofits. Regulators have expressed concerns about the increasingly high education costs for Chinese families.
The move sent stocks in China’s largest tutoring providers— New Oriental Education & Technology Group (EDU), TAL Education Group (TAL) and Gaotu Techedu (GOTU)—down by more than two thirds since last Thursday, while dragging many other Chinese stocks lower on fears that more sectors will face stricter regulation.
On Tuesday, a number of Wood’s actively managed funds, again significantly reduced holdings in Chinese stocks, including internet giant Tencent (TCEHY) and healthcare software firm Ping An Healthcare and Technology (1833.HK), according to the firm’s public data on its trading activity.
ARK ETFs also on Tuesday sold e-commerce-leaders Pinduoduo (PDD) and JD.com (JD), food-delivery app Meituan (3690.HK), online recruitment services KanZhun (KZ), and automaker BYD (BYDDY).
In an investment seminar earlier this month, Wood said China’s tech sector might be facing a valuation reset. The $5.8 billion ARK Next Generation Internet (ARKW) now has just 2.7% of its assets invested in China, according to Morningstar data, while the $2.7 billion ARK Autonomous Technology & Robotics (ARKQ) and $3.7 billion ARK Fintech Innovation (ARKF) still have 18% and 12% of their portfolios in Chinese stocks, respectively.
Wood’s flight from Chinese stocks has helped her funds avoid what could’ve been much larger damage. The iShares MSCI China ETF (MCHI) plunged 13% from last Thursday’s close to Tuesday’s close. All of ARK’s ETFs, on the other hand, declined less than 5% during the same period.
The iShares MSCI China ETF bounced back nearly 6% in Wednesday trading, while ARK funds have gained around 2%.
Write to Evie Liu at evie.liu@barrons.com
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Cathie Wood's ARK Innovation ETF Has Sold Nearly All Its Chinese Stocks - Barron's
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