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Cathie Wood says Ark has 'dramatically' cut its China investments to focus on Beijing-friendly companies like JD Logistics and Pinduoduo, report says

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© Ark Invest; Insider Cathie Wood runs Ark Invest. Ark Invest; Insider

  • Cathie Wood says Ark has “dramatically” cut its exposure to China after Beijing’s crackdown on business.
  • She said she’s now more interested in companies currying favor with Beijing, such as JD Logistics and Pinduoduo, the Financial Times reported.
  • Chinese regulators summoned Tencent and other gaming companies on Thursday as the clampdown continued.

Cathie Wood has said Ark Invest has “dramatically” offloaded Chinese stocks as a result of Beijing’s crackdown on big business and is now focusing on companies currying favor with the government, the Financial Times reported.

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The investing environment in China is now markedly different from at the start of the year, when US investors flocked to the country’s assets, Wood told a Mizuho Securities investor conference Thursday, according to the FT.

“We have not eliminated our positions, but we have reduced our positioning in China dramatically and we have swapped some of our holders, which became losers, into companies that we know are courting the government with common prosperity,” Wood said, according to the FT.

Under President Xi Jinping, China has this year tightened its grip on the country’s big businesses as it focuses on equality and redistribution under a policy of “common prosperity.”

Ark Invest, the investment firm Wood founded and runs, is increasingly looking to companies such as JD Logistics and e-commerce platform Pinduoduo that are trying to stay on the right side of the government, she said.

Read more: It’s actually a terrible time to invest in startups and VC firms, says the head of research at Cathie Wood’s $50 billion ARK Invest

The star stock-picker said JD Logistics, which is part of e-commerce giant JD.com, is building infrastructure in China on low margins, the FT reported. Ark stepped up its holding in the parent company in late August, after earlier cutting its exposure.

She also said Pinduoduo is investing heavily in groceries and food supply chains. “I think it’s basically investing for free to help the government,” she said.

On Thursday, Chinese regulators summoned gaming companies including internet giant Tencent and told them they need to focus less on profit. The authorities also clamped down on ride-hailing app Didi Chuxing just days after it raised more than $4 billion on US markets in June.

The crackdown has sent investors running from Chinese stocks. Tencent fell more than 8% in Hong Kong on Thursday, while the Nasdaq Golden Dragon Index of Chinese stocks listed in the US is down more than 30% over the last six months.

Wood, who shot to prominence in 2020 when her tech-focused funds roared ahead of the market, has sharply cut Ark’s exposure to Chinese stocks such as Tencent. However, Wood’s funds bought some Chinese companies again in August after prices had fallen.

Yet she said on Thursday: “We think [China will] reconsider some of these regulations with time and we won’t give up on China because they are so focused on innovation and they are so inherently entrepreneurial.”

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