- Cathie Wood's Ark Invest has rapidly sold its exposure to Chinese technology stocks over the past week.
- The move comes amid a regulatory crackdown on Chinese tech giants like Didi, Alibaba, and ByteDance.
- "I do think there's a valuation reset," Wood told investors in a monthly webinar on Tuesday.
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Cathie Wood's Ark Invest has slashed its exposure to Chinese tech stocks amid an ongoing regulatory crackdown, according to Ark's daily trading updates.
Ark's flagship Disruptive Innovation ETF has seen its exposure to Chinese stocks fall to less than 1% from a high of 8% in February, according to data compiled by Bloomberg. Ark's exposure to Chinese tech stocks is at its lowest level since 2014.
Over the past week, the thematic investment manager sold three million shares of HUYA, one million shares of Tencent, and more than 600,000 shares of JD.com.
The move comes amid increased regulatory scrutiny from China of tech giants like Didi and ByteDance. Less than a week after its IPO, Didi was removed from Chinese app stores over data security concerns. Those same concerns led to TikTok parent ByteDance shelving its planned IPO. China has also led a crackdown on tech giants Alibaba, Ant Group, and Tencent in recent months.
In a webinar with investors on Tuesday, Wood said, "From a valuation point of view, these stocks have come down and again from a valuation point of view, probably will remain down."
The valuation reset is clear in the current price-to-earnings ratio of Chinese tech giants Alibaba, Baidu, and JD.com.
According to data from FactSet, Alibaba's current P/E ratio of 19x is well below its historical P/E ratio of 24x. Baidu's current P/E of 16x is below its historical P/E of 21x, and JD.com has seen its valuation chopped nearly in half, with its current P/E of 36x below its historical P/E of 62x.
Since their peak in February, Chinese tech stocks have lost more than $500 billion in market value.
"I do think there's a valuation reset," Wood said on the Tuesday webinar.
Ark's Disruptive Innovation ETF was flat in Wednesday morning trades, and is down 2% year-to-date.
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