Cathie Wood’s Ark Invest Drops Chinese Tech Shares Amid Regulatory Crackdown

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  • Cathie Wood’s Ark Invest quickly sold off its exposure to Chinese tech stocks over the past week.
  • The move comes amid a regulatory crackdown on Chinese tech giants like Didi, Alibaba and ByteDance.
  • “I think there’s a valuation reset,” Wood told investors during a monthly webinar on Tuesday.
  • Sign up for our daily newsletter, 10 things before the opening bell here.

Cathie Wood’s Ark Invest has reduced its exposure to Chinese tech stocks as part of an ongoing regulatory crackdown, according to Ark’s daily updates.

Ark Disruptive Innovation’s flagship ETF saw its exposure to Chinese equities drop to less than 1% from a high of 8% in February, according to data compiled by Bloomberg. Ark’s exposure to Chinese tech stocks is at its lowest level since 2014.

During the past week, the thematic investment manager sold three million shares of HUYA, one million shares of Tencent and more than 600,000 shares of JD.com.

The move comes amid increased regulatory control by China over tech giants like Didi and ByteDance. Less than a week after its IPO, Didi was pulled from Chinese app stores for data security concerns. Those same concerns led TikTok’s parent company, ByteDance, to suspend its planned IPO. China has also led a crackdown on tech giants Alibaba, Ant Group and Tencent in recent months.

During a webinar with investors on Tuesday, Wood said, “From a valuation perspective these stocks have gone down and again from a valuation perspective they will likely stay lower.”

The valuation reset is clear in the current price-to-earnings ratio of Chinese tech giants Alibaba, Baidu and JD.com.

According to FactSet data, Alibaba’s current P / E ratio of 19x is well below its historic P / E ratio of 24x. Baidu’s current P / E of 16x is lower than its historic P / E of 21x, and JD.com has seen its valuation cut almost in half, with its current P / E 36x lower than its historic P / E of 62x.

Since their peak in February, Chinese tech stocks have lost more than $ 500 billion in market value.

“I think there’s a rating reset,” Wood said during Tuesday’s webinar.

Ark’s Disruptive Innovation ETF was flat in Wednesday morning trading and is down 2% year-to-date.

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