Cathie Wood of Ark Invest is chilling in China

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“We have not eliminated our positions, but we have drastically reduced our position in China and changed some of our headlines, which became losers, into companies we know are courting the government with a ‘common prosperity’.” said Wood. .

Wood told investors at a Mizuho stock conference on Thursday that his change in strategy was motivated by a series of regulatory changes imposed over the weekend by July by the Chinese government on the country’s online education industry. said FT.

Authorities are now focusing on social issues and social engineering at the expense of capital markets, he added. CNN Business has contacted Ark Invest and conference organizers to comment.

Wood’s flagship fund, traded on Ark Innovation (ETF) stock exchanges, rose nearly 150% in 2020 and helped make it one of Wall Street’s most active investors. Although this year has had a lower return, the fund still comfortably exceeds the annualized returns delivered by the S&P 500 (INX) for the last five years.

Wood becomes the last high-profile investor to raise red flags over China, where the ruling Communist Party has launched widespread crackdown on private enterprise.

On Monday, financier George Soros criticized BlackRock (BLK) bullish approach in China, including the recent launch of investment products by the asset manager in the country and its recommendation that investors triple their allocations to Chinese assets.
“Pouring billions of dollars into China now is a tragic mistake,” Soros wrote in a paper published in the Wall Street Journal, adding that BlackRock “seems to misunderstand President Xi Jinping’s China.”

Companies in the technology, education and gaming sectors have faced an attack on new rules on data privacy and workers’ rights in recent months. Beijing’s strongest control in business has shaken global investors, erasing trillions of the value of Chinese stocks and triggering fears about the future of innovation in China.

Shares in Chinese gaming companies Tencent (TCEHY) i NetEase (DETECTOR) it sank Thursday after Chinese authorities told companies to “break from the lone focus of seeking profits or attracting players and fans.” Last week, China banned online players under the age of 18 from playing on weekdays and limited their play to just three hours most weekends.
China tells Tencent and Netease to focus less on profits as gaming crackdown expands

To protect its returns, Ark Invest focuses on companies that are “seeking favor” with Beijing, Wood said.

Its revised investment portfolio in China includes a retail giant JD.Com’s (JD) logistics business and Pinduoduo (PDD), which she said invested heavily in the grocery and food supply chain sector.

Wood said Ark Invest does not plan to “give up” China, because the country is very focused on innovation and “inherently entrepreneurial.”

“We believe they will reconsider some of these regulations over time,” he added, referring to the government.

– Michelle Toh, Laura He and Paul R. Monica contributed to the communication.

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