ARK Buys Back Into China Stocks

August 27, 2021

Cathie Wood and her ARK Investment Management team have rebuilt positions in China tech stocks in recent days despite Beijing’s ongoing crackdown on tech and education companies.

An ETF.com analysis of ARK’s trade notifications since last Thursday shows the firm has bought a net 1.17 million shares of JD.com and its JD Logistics subsidiary, along with about 235,000 shares of Tencent and 85,824 shares in farmer-to-consumer firm Pinduoduo.

The majority of those shares were placed into the ARK Space Exploration & Innovation ETF (ARKX) and the ARK Fintech Innovation ETF (ARKF), while JD.com was lifted to the eighth largest holding in the ARK Autonomous Technology & Robotics ETF (ARKQ).

 

ARK China Stock Moves, 8/19/2021 - 8/25/2021

Ticker Company Net Shares Bought/Sold
2618HK JD Logistics 949,290
TCEHY Tencent Holdings 234835
JD JD.com 223835
PDD Pinduoduo 85824
BABA Alibaba -84201
BIDU Baidu -84975
1833HK Ping An Healthcare and Technology Company Limited -1427400
3690HK Meituan -1551582
6060HK ZhongAn Online P & C Insurance Co., Ltd. -2228500

Source: ARK Investment Management

 

However, the firm sold off a combined 5.37 million shares in other China firms during the period, including insurance provider ZhongAn and e-commerce platform Meituan.

ARK was among plenty of investors that were selling off Chinese holdings after the ruling Chinese Communist Party ordered security reviews of U.S.-listed tech companies like Didi and prohibited certain education companies from going public or making profits.

China Delivery Firms Beat Expectations

Beijing later doubled down on its growing regulatory reach as a matter of national and cultural security, referring to video games as “spiritual opium” and noting the country’s growing wealth gap.

Despite the gloom over Chinese companies, JD.com managed to beat a median earnings-per-share estimate of 35 cents by 10 cents on Monday, while Pinduoduo posted its first quarterly profit ever of US$372 million on Tuesday.

Those earnings beats brought some life into some of the largest Chinese large caps, although many remain well in the negative returns over a three-month period:

 

Chart courtesy of StockCharts.com

 

Speaking to Bloomberg Radio on Tuesday, Wood said JD and Pinduoduo’s focus on groceries, delivery logistics and servicing smaller cities seems to put them under less regulatory scrutiny than technology and education companies.

“If you were to look at what we were doing in those portfolios, we were really swapping them out for other names that we think will continue to be in harm’s way, or certainly under government pressure,” she said.

Contact Dan Mika at [email protected], and follow him on Twitter

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