Cathie Wood, CEO of Ark Invest, speaks during a CNBC interview on the floor of the New York Stock Exchange, February 27, 2023.
Brendan McDermid | Reuters
Ark Invest’s Cathie Wood says her flagship innovation fund has slashed its China exposure to zero as the developing market faces a recession.
The tech investor revealed that she ARK Innovation ETFwith nearly $9 billion in assets under management, exited revenue-generating stocks from China as she bolstered her portfolio on her favorite bets like Tesla, Coinbase, Roku And Launch during a market downturn.
“As we always do in bear markets, we focus our strategies on the most convincing names and especially the Chinese names, which come up one after another when we are focusing so now, at least in the top strategy, we have no exposure to China,” Wood said in a pre-recorded investor webinar on Thursday.
ARKK used to own shares in the Chinese tech giant Tencent and property site KE Holdings. Wood said her exposure to China and other emerging markets will reach about 25% in 2020 because she was impressed by China’s initial response to the pandemic.
“We’ve looked at monetary and fiscal policy responses around the world and have been impressed with China’s restraint. They don’t throw money at the problem. They’re very disciplined in their fiscal and monetary policy responses,” Wood said.
The innovation investor said she changed her mind about China after Beijing began tightening its grip on the economy by cracking down on the super-rich and the tech sector.
The much-followed investor said she is particularly concerned about China’s property market, which is saddled with huge debt after more than a decade of rapid expansion.
“It is responsible for about 15 years of double-digit real GDP growth… and such growth can cover up a lot of guilt,” says Wood. “And those sins are often related to debt, and importantly in the asset sector, we believe China is facing a payday on this issue.”
ARK Fintech Innovation ETF (ARKF) still owns a small stake in the Chinese e-commerce company JD.combut it overturned other Chinese names like Pinduoduo and Tencent.
Still, Wood said she could buy back shares tied to China as the country passes the test and the market enters a new bull cycle.
“More diversification in bull markets, especially as we get more IPOs and as we revisit some of the names we’ve dropped in our focus strategy,” Wood said.
Her flagship fund has had a great year so far as her top holdings recovered from heavy losses due to rising interest rates. ARKK to increase by more than 50% by 2023.
