- Cathie Wood’s Ark Invest is quickly selling Chinese stocks from their suite of ETFs.
- The rapid selling from Ark Invest comes amid an ongoing regulatory crackdown from Beijing.
- ARK Invest has sold its entire position in Tencent on Friday, and is selling KE Holdings and JD.com.
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Cathie Wood’s Ark Invest is rapidly shedding its positions in Chinese technology stocks amid an ongoing regulatory crackdown by Beijing.
On Friday, Ark Invest sold the last remaining shares of its stake in Tencent, and is quickly shedding KE Holdings, an online property website based in China, and JD.com, according to Ark’s daily trading updates. KE Holdings fell as much as 26% on Monday.
The latest regulatory crackdown in China hit education and tutoring companies on Friday, with companies like TAL Education, Gaotu Techedu, and others plunging more than 50%. China said it is banning tutoring on holidays and weekends for students to lessen the burden of schoolwork, which makes up a big chunk of the tutoring companies business.
The China’s increased scrutiny on certain businesses began late last year following the abrupt cancellation of Ant Group’s IPO. A clampdown on the fintech giant then spread to Alibaba and Tencent earlier this year, with both getting hit with anti-monopoly measures and fines.
Since then, ride-hailing giant Didi, which went public last month, has been hit with regulatory actions by China amid data-security concerns. That crackdown on Didi led to TikTok parent ByteDance shelving its planned IPO.
All in all, the uncertain regulatory environment for Chinese stocks has led to an investor exodus from popular names like Tencent and Alibaba, which were both down as much as 10% and 7% in Monday trades, respectively.
In a webinar with investors earlier this month, Wood said a “valuation reset” among Chinese stocks is occurring, and that their valuations could remain depressed for some time.
“From a valuation point of view, these stocks have come down and again from a valuation point of view, probably will remain down,” Wood said.
On the flip side, Wedbush analyst Dan Ives thinks losses for Chinese tech stocks could lead to gains in US mega-cap tech stocks, as investors rotate out of once popular names like Alibaba and Tencent in favor of Amazon, Apple, Microsoft, and Google.