Some investors are betting big on Chinese tech despite Cathie Wood’s warning of a ‘valuation reset’

Cathie Wood
Cathie Wood is the CEO and chief investment officer of ARK Invest, which runs three of the highest-returning stock ETFs of the last three years.

  • Cathie Wood is selling shares in Chinese tech companies, but some investors have a different view.
  • The KraneShares CSI China Internet ETF saw record inflows this week, according to Bloomberg.
  • On Tuesday, Wood told investors, “From a valuation point of view, these stocks have come down and again from a valuation point of view, probably will remain down.”
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Cathie Wood is selling off millions of shares in Chinese tech companies, but some investors think she’s got it backwards.

The KraneShares CSI China Internet ETF, worth some $5 billion, saw two days of record inflows this week, according to a new Bloomberg report. This week, more than $631 million has come into the fund, even as others worry China’s regulatory crackdown on ride-hail firm Didi Chuxing could presage future troubles for Chinese tech companies.

“Maybe Cathie Wood’s getting out was the final [contrarian] sentiment indicator those investors needed,” Susquehanna’s Chris Murphy told Bloomberg.

One reason could be that pessimism about China’s regulatory environment is already priced into the country’s tech stocks. All the while, investors have dove headfirst into US tech, leading certain investors to fret that they are overvalued.

“Right now, the momentum-chasing trade has been in the large-cap U.S. tech names. But if it shifts to China tech, watch out,” said Murphy.

The KraneShares ETF’s number one holding, Tencent, has taken a beating recently, falling over 16% in the past six months. Likewise for Alibaba, its number two, down 15% over the same period.

Wood’s Disruptive Innovation ETF has sold one million shares of Tencent since February.

On Tuesday, Wood told investors, “From a valuation point of view, these stocks have come down and again from a valuation point of view, probably will remain down.”

“I do think there’s a valuation reset,” she added.

Read the original article on Business Insider