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Cathie Wood’s Ark ETFs, Aberdeen are nibbling in Tencent, JD.com and other Chinese tech stocks in boost for market bulls
- Cathie Wood’s smaller Ark ETF vehicles are picking up and adjusting stakes in Chinese tech stocks to keep out of harm’s way
- Business Owner TGV, a US$500 million hedge fund, stepped up its bets on Alibaba and indirectly in Meituan in the first half
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Cathie Wood’s Ark Investment Management may be turning less bearish on Chinese tech stocks based on last week’s fund transactions. She is, however, still shielding her biggest exchange-traded fund (ETF) from the risk since dumping almost all of them in July.
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Wood, chief executive of the New York-based money manager, last week added the American depositary shares of companies including Tencent Holdings, JD.com and Pinduoduo in the smaller of her six actively-managed ETFs, filings showed. A German hedge fund managed RV Capital disclosed its bullish view on China.
Her flagship US$25.5 billion Ark Innovation ETF, however, has kept a distance. None of them has reappeared in the fund’s top 49 holdings it published as of August 27.
The caution appears to be justified, as a rebound in Chinese tech stocks last week proved to be fleeting. The 7.3 per cent recovery in the Hang Seng Tech Index appears to be aided by favourable technicals, while company and industry fundamentals are still clouded by China’s regulatory assault.
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“China’s regulatory clampdown may appear heavy-handed, but should be seen in context,” said Nicholas Yeo, head of China equities in Hong Kong at Aberdeen Standard Investments, which managed US$635 billion globally at the end of 2020. “Regulators will continue to focus on the internet, education, real estate and health care [sector], But that does not mean investors should avoid these sectors. Those who have sold indiscriminately risk missing opportunities.”
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Wood reduced her bets on China in the Ark Innovation ETF to near-zero last month, from about 8 per cent in February, avoiding steeper losses. Since late 2020, President Xi Jinping has unleashed a torrent of regulations, culminating in a US$1 trillion sell-off in July in Chinese stocks globally.
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