“From a valuation point of view, these stocks have come down and again from a valuation point of view, probably will remain down.”
— Ark Investment Management CEO Cathie Wood
Ark Investment Management CEO Cathie Wood is seemingly throwing in the towel on Chinese internet stocks. In monthly remarks, Wood discussed a “valuation reset,” according to Bloomberg News.
Ark has put its money where its mouth is. On Tuesday, the Ark Innovation ETF
sold $25 million worth of Tencent
stock, continuing a selling spree in the stock that has brought its holding in the Chinese internet company down to 0.1% of the portfolio. On Bloomberg’s calculations, the weighting of China in that fund is now less than 1% from 8% in February, and the weighting of China in the Ark Next Generation Internet ETF
is the lowest since at least 2014.
Tencent did get a rare bit of good news after its proposed takeover of search engine developer Sogou was approved by China’s antitrust regulator. But China has taken a range of measures against local tech companies including tech conglomerate Alibaba
and ride-hailing service DiDi Global
in areas including competition, data privacy and financial services.
As a result, Chinese stocks have been one of the worst performers globally this year. The Shanghai Composite
and the Hang Seng
are each up 2% in 2021, compared to the 16% rise for the S&P 500
and the 12% gain for the MSCI All-Country World index.