At the annual Milken Institute Global Conference, ARK Invest CIO Cathie Wood explained her rationale for dumping hundreds of millions of dollars worth of Chinese stocks throughout the first half of 2021.
Despite Wood increasing exposure to select Chinese tech names including JD.com (NASDAQ: JD), Niu Technologies (NASDAQ: NIU) and Pinduoduo (NASDAQ: PDD) early in 2021, she says ARK started “pulling back” from the majority of its China exposures when regulators stifled Jack Ma’s Ant Financial Group IPO in November 2020.
“We had got into China because we saw their reaction to COVID – it was the most disciplined country in terms of monetary and fiscal policy during the crisis and I thought China had the possibility of becoming the Germany and Switzerland of the world,” she said.
“But… Almost every week and every month China was announcing a regulatory crackdown” she said.
ARK’s flagship growth fund, the ARK Innovation Fund ETF, currently has no exposure to Chinese equities, while some of ARK’s smaller thematic ETFs do maintain underweight Chinese positions.
“We do own some China in a few of our portfolios focused on autonomous technology and robotics. But we are very particular – they have to be low margin companies because margin is clearly not appreciated by the government any more – they want common prosperity.
“Last weekend the government went after the regulators who had focused on the financial industry as well as the financial institution… And so I’m just saying, wow we’re playing with fire.”
Wood also shared her views on China’s attempts to reign in surging mainland property prices.
President Xi Jinping famously said in 2017 “Housing is for living, not speculation” and this sentiment has been repeated by the Government amid the China Evergrande crisis which has cast a dark cloud over China’s economy in recent months.
“What I don’t understand is why they are going after real estate, which accounts for 75 per cent of household savings in China,” she said.
“If prices are going down which they have been, then that will really hurt consumer confidence and I think it already is.”
The current top 10 holdings in the ARK Innovation Fund are:
- Teladoc Health
- Coinbase Gobal
- Unity Software
- Zoom Video Communications
You can see all holdings data as of 10/20/21 here.