Cathie Wood says she sees potential in disruptive Chinese tech firms, even though their shares have tumbled recently

A Hisense chip is on display during the Appliance & Electronics World Expo (AWE) 2021 at National Exhibition and Convention Center (Shanghai)
  • The CEO of Ark Invest said “disruptive innovation platforms” in China were now competing with those in the US.
  • Speaking at a webinar, she said she was impressed by China’s commitment to driving innovation.
  • Chinese tech stocks are down, having been sold off heavily this month in volatile trade.
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Cathie Wood, the CEO of Ark Invest, said she sees growth potential in “disruptive innovation platforms” in China and that they are competing with similar ventures in the US now. Chinese tech stocks have been trending downwards recently as they face legal and regulatory pressure.

Speaking at a webinar in collaboration with Li Yimei, chief executive of China Asset Management this month, she discussed China’s commitment to innovation and said the country’s platforms have made huge progress in area such as DNA sequencing, energy storage, artificial intelligence, blockchain and robotics, especially relating to productivity, “which is good for the entire economy,” IgnitesAsia quoted Wood as saying.

Wood, through her ARK Invest exchange-traded fund, was one of the top performing asset managers of 2020, thanks in large part to her bets on disruptive technology.

She said many Chinese platforms are now close competitors to those in the US, after having caught up in recent years. “Competition in technology is a really good thing, in terms of moving the technology forward faster than otherwise would have been the case,” she said.

She said she was impressed with the government’s collaboration with the private sector, as she believes this will further the development of microchips and artificial intelligence.

Wood also said it reflected the government’s commitment to electric vehicles “I’m very impressed that China allows Tesla into the country without a local manufacturer. It is so determined to have electric vehicles proliferate throughout China,” she said.

Chinese tech shares have tumbled recently. The Hang Seng Tech index, which contains a number of big Chinese tech names such as Alibaba, Tencent, and FoxConn, is one of the worst performers from among the major indices this year, with a loss of almost 3%, versus a 1.5% gain in the tech-heavy Nasdaq 100.

Performance has been highly volatile for months, as tech stocks are impacted by legal and regulatory changes. Recently, the sector fell after news of a potential government-backed company designed to oversee tech data. Tensions between the US and China and a “Cold Tech War” were also major risk factors, Wedbush analyst Dan Ives said on Monday.

Wood’s Ark Invest published a note this week saying “Chinese technology companies are caught in political crosscurrents”, referring to the developments that have been causing stocks to crash. Ark Invest believes they will only cause “short term turmoil” and said “policies might accelerate or hinder the pace of innovation for a time, but we believe self-preservation probably will bring policymakers back to both tables.”

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Something weird just went down in the stock market, and Wall Street is speculating it’s the result of a fund liquidation

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Traders work during the closing bell at the New York Stock Exchange (NYSE) on March 18, 2020 at Wall Street in New York City

  • A selling spree on Wall Street erased $35 billion from the values of stocks of major companies Friday.
  • The selloff appears to be in part the result of the “forced liquidation of positions” held by Archegos Capital Management, CNBC reported.
  • Goldman Sachs liquidated $10.5 billion worth of stocks in block trades, Bloomberg reported.
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A selling spree erased $35 billion from the stock values of major Chinese tech and US media companies Friday, and Wall Street is speculating it was in part driven by the forced liquidation of an investment firm’s holdings.

Shares of ViacomCBS and Discovery fell as much as 35% Friday, while US-listed shares of China’s Baidu, Tencent Music, Vipshop and others also plunged this week. The selloff came as the broader US market ended the week higher, with the Dow closing up over 450 points, buoyed by optimism over the pace of coronavirus vaccinations.

The selloff in the Chinese internet ADRs and US media shares was in part due to the “forced liquidation of positions” held by Archegos Capital Management, CNBC reported, citing a source familiar with the situation.

Archegos describes itself as a family investment office focusing on equity investments primarily in the US, China, Japan, Korea and Europe. Archegos is run by Bill Hwang, the founder of the now defunct Tiger Asia Management. Hwang’s fund is “known for employing leverage,” IPO Edge reported.

The group did not immediately respond to Insider’s request for comment and its website appeared to be offline on Saturday.

Goldman Sachs and Morgan Stanley liquidated large holdings this week, the news site IPO Edge was first to report, adding that the two investment banks have ties to Archegos. The move likely came after Archegos was unable to meet a margin call by an investment bank, CNBC and IPO Edge reported, citing sources familiar with the matter.

Bloomberg reported Saturday that Goldman Sachs liquidated $10.5 billion worth of stocks in block trades, where banks look to find buyers for big stock positions. The block trades included $6.6 billion worth of shares of Baidu, Tencent and Vipshop before the US market opened on Friday morning, Bloomberg reported, citing an email to clients.

Goldman then sold $3.9 billion worth of shares in media giants ViacomCBS and Discovery, as well as luxury fashion retailer Farfetch, and others, according to the report.

Goldman Sachs did not immediately respond to Insider’s request for comment.

Morgan Stanley also led share offerings on behalf of an undisclosed shareholder or shareholders, Bloomberg reported. Some of the trades exceeded $1 billion in individual companies, Bloomberg reported, citing its own data.

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Japanese ecommerce giant Rakuten jumps 24% after disclosing sale of stake to Walmart, Tencent

rakuten

Shares of Japanese e-commerce giant Rakuten jumped 24% on Monday after the company announced plans to raise $2.2 billion to shore up its logistics infrastructure from artificial intelligence to mobile in order to better compete with US heavyweights.

The company on Friday said it will sell shares to major investors such as Tencent Holdings, Walmart, and Japan Post Holdings.

In total, Rakuten plans to issue 211,656,500 shares at the equivalent of around $10.50 apiece with a payment date between March 29 and April 30.

Japan Post is expected to purchase 131,004,000 shares for an 8.3% stake while Chinese technology conglomerate Tencent is expected to buy 57,382,900 for a 3.6% stake. American retail giant Walmart is expected to get 14,536,000 shares for a 0.9% stake.

“These new investments in Rakuten indicate both high expectations for the growth and impact of the Rakuten Ecosystem with the mobile service at its core, as well as great potential for further collaboration with leading companies from the world’s three leading economies,” Hiroshi Mikitani, Rakuten Chairman and CEO, said in a statement.

The company, founded in 1997, also added that apart from boosting its technological backbone to keep up with the “rapidly changing internet industry,” the selling of shares is also to “strengthen the relationship with the panned allottees.”

Rakuten currently has over 70 businesses, and admitted in the statement that stable logistics services have become a “pressing issue,” especially amid the pandemic. This explains its partnership with the national postal service of Japan, which has a nationwide distribution network as well as a huge delivery volume and data.

As for Tencent, one of the largest businesses in China by market capitalization that specializes in social media and communication, it has been in contact with Rakuten for several years “especially on matters related to internet development trends,” the statement said.

“Rakuten has built a vibrant ecosystem through its membership and loyalty program, extending its [unrivaled] strength from e-commerce to FinTech and digital content,” Martin Lau, Tencent executive director and president, said. “We look forward to pursuing strategic cooperation across activities including digital entertainment and e-commerce, creating value for users and building the Internet ecosystem together.”

Walmart, meanwhile, is part of Rakuten’s push to ramp up the Japanese company’s online grocery business, “Rakuten Seiyu Net Super,” which has seen steady growth since 2018. Rakuten has also promoted the transition of the in-house official language into English since 2010 – a rare move for a Japanese company.

Rakuten, with its 1.5 billion members worldwide, has a market value of $16.5 billion.

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Tencent sheds $65 billion in 2 days as investors fear a Chinese government crackdown

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Pony Ma is chief executive of Tencent

Tencent shares tumbled 3.5% in Hong Kong on Monday, meaning the company’s value has fallen more than $65 billion in two days due to concerns that the Chinese authorities will ramp up scrutiny of the tech giant.

Chinese regulators fined the do-it-all tech company $77,000 on Friday, and also penalized other big names such as Baidu and ByteDance, for not seeking approvals for deals. The authorities could also force the company to restructure, according to a Bloomberg report.

For some investors, the increased scrutiny has worrying echoes of the government’s crackdown on Jack Ma’s Ant Group, which had its $37 billion IPO suspended and faces a major restructuring.

Tencent’s shares slid around 8% in Hong Kong over Friday and Monday, to 628 Hong Kong dollars ($80.89).

Its market capitalization fell to $776 billion on Monday, down more than $65 billion from $841 billion on Thursday, Bloomberg data showed.

The stock is now well off a record high of more than 760 Hong Kong dollars touched earlier in 2021, thanks in part to a broader sell-off of global tech stocks that has been driven by rising bond yields.

Tencent is a conglomerate with services including gaming, social network, music, e-commerce and payments.

Its chief executive Pony Ma is worth $64.4 billion, making him the world’s 15th richest person and China’s second richest, according to the Bloomberg billionaires index.

Regulators are likely to force Tencent to establish a financial holding company including its banking, insurance and payments services, according to Bloomberg, which cited people with knowledge of the situation.

Many of the biggest businesses in China’s rapidly growing financial technology sector are facing increased scrutiny from the government.

The banking authority has said the new rules are aimed at preventing monopolies and ensuring stability in the market.

Hong Kong and Chinese stocks have tumbled in recent weeks as rising bond yields have made rapidly-growing tech stocks look less attractive – but also due to concerns about a government crackdown.

The Hong Kong Hang Seng index inched 0.33% higher on Monday, but the exchange’s tech index dropped 2.3%.

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