Ark Investment sells China tech stocks


Gaining momentum: A Tencent booth at an exhibition during the China Internet Conference in Beijing yesterday. The decision to approve an acquisition for Tencent has eased some concerns about tech regulations. — Reuters

BEIJING: Cathie Wood’s Ark Investment Management has been selling Chinese tech stocks, with holdings in one of the firm’s funds falling to the lowest on record as Beijing’s crackdown on the sector intensifies.

China’s weighting in Wood’s flagship Ark Innovation ETF has plunged to less than 1% from 8% as recently as February, while that of the Ark Next Generation Internet ETF has fallen to 5.4%, the lowest compared to month-end figures since Bloomberg began compiling the data in October 2014.

The China weighting in Ark’s fintech ETF has remained steady at around 18%.

“I do think there’s a valuation reset, ” Wood, Ark’s founder and chief executive officer, said in response to questions on the outlook for larger Chinese tech firms during a monthly webinar with investors on Tuesday.

“From a valuation point of view, these stocks have come down and again from a valuation point of view, probably will remain down.”

The paring of Chinese tech holdings by one of the world’s biggest thematic fund providers underscores how the sector is losing its allure as Beijing increases scrutiny of the industry’s data collection and offshore listings.

Many investors are wary of calling a bottom, even as a gauge of China’s Internet companies has rebounded in recent days after losing over US$1 trillion (RM4.2 trillion) of market value since mid-February.

Ark’s falling exposure to China reflects both reduced stakes in bellwethers such as Tencent Holdings Ltd as well as declining valuations. An Ark representative declined to comment on the firm’s holdings.

The active ETF provider hasn’t changed its outlook or five-year price targets on larger Chinese tech stocks that it owns, Ark’s Asia innovation analyst Yulong Cui said on the webinar.

“This is largely because the regulatory changes have not, for the most part, impacted the businesses from a fundamental point of view with regards to cuber security clients or US listing reviews, ” he said.

The Hang Seng Tech Index was trading little changed after recouping some of its yearly loss in three straight sessions of gains through Tuesday.

China’s decision to approve an acquisition for Tencent has eased some concerns about regulations and added to the positive momentum that started after the gauge turned oversold on technical indicators last week.

These vehicles are “very momentum oriented being loaded on Tech and it likely made sense to reduce the footprint faced with regulatory pressure to encourage more competition in China, ” said Sebastien Galy, a senior macro strategist at Nordea Investment Funds SA.

While regulatory scrutiny is here to stay for the next few years, it seems like it is temporarily ebbing so these funds’ positioning can change again, he added. — Bloomberg

Article type: metered
User Type: anonymous web
User Status:
Campaign ID: 46
Cxense type: free
User access status: 3
Join our Telegram channel to get our Evening Alerts and breaking news highlights
   

Next In Business News

Bitcoin skids to six-month low as fears of Ukraine conflict shake markets
Govt considering aid in the form of special grants for MSMEs, informal traders affected by flood
Raya Airways refutes speculations on acquisition
Maju Healthcare inks MoU with MAH
Haily bags RM41mil contract to resort villas in Johor
Financial Sector Blueprint 2022-2026 an opportunity to build stronger economy
Bursa Malaysia ends lower in line with regional retreat
Oil prices rise on supply fears amid tensions in Eastern Europe, Middle East
Bank Negara’s international reserves at US$116.2bil as at Jan 14
Maybank says allegations it would face major financial trouble due to Genting HK are baseless

Others Also Read


Vouchers