Hedge fund manager Dan Niles says he's given up on Chinese stocks for now due to regulatory crackdown

Published Wed, Jul 7 20215:26 PM EDT

Kevin Stankiewicz @in/kevin-stankiewicz-b5593466 @kevin_stank

Hedge fund manager Dan Niles told CNBC on Wednesday he is currently keeping China-based companies out of his stock portfolio as a result of the government's heightened regulatory crackdown . "They've been steadily increasing the pressure on technology companies, in particular, and so we sort of looked at that and said, 'You know what, you've got headline risk everyday.' And for right now, we've gotten out of them," the Satori Fund founder and senior portfolio manager said on "Closing Bell." Niles said while some Chinese tech firms may actually have a solid financial outlook, the stocks are very sensitive to reports of further regulatory scrutiny and that makes them challenging to own. On Tuesday, for example, companies such as Tencent Music Entertainment , JD.com and Alibaba faced selling pressure as investors reacted to Chinese regulators taking steps to limit the availability of ride-hailing giant Didi Global . Didi, which completed its initial public offering on the New York Stock Exchange just last week, is now facing now a cybersecurity review and also accusations from Chinese regulators that it had illegally collected users' personal data. App stores were told by the country's cyber regulator to stop offering Didi's app in response to the data collection claim, according to Reuters. In response, Didi said it planned to make changes in order to adhere to data rules. Didi closed down 4.64% Wednesday to $11.91 per share. A week ago, on its first trading day on the NYSE, Didi shares closed at $14.14 apiece . Some on Wall Street, such as CNBC's Jim Cramer, have said the Didi debacle could cause investors to rethink their approach to investing in Chinese companies' IPOs. For Niles, he said he views the recent developments as a continuation of a trend that began with Ant Group's blockbuster IPO being suspended in November . "We were clearly wrong ... earlier when we thought things had hit bottom, and then the Chinese government ramped things up again in terms of going after these companies," Niles said. "So, we've decided, you know what, for right now, they haven't gotten cheap enough where we're willing to try to catch the falling knife, as it were. We don't own any of them anymore." In early April, Niles told CNBC his fund was buying shares of Chinese internet giant Baidu in an attempt to capitalize on the Archegos Capital Management fiasco . "We still like it," Niles said Wednesday of Baidu. "We hope to own it again at some point, but we'll see when the headlines stop getting worse, I guess, in China. There's a lot of great companies in the U.S. that you can own which you don't have those issues with."

A security personnel stands guard at the opening session of Baidu's annual AI developers conference Baidu Create 2019 in Beijing, China, July 3, 2019.

Jason Lee | Reuters

Hedge fund manager Dan Niles told CNBC on Wednesday he is currently keeping China-based companies out of his stock portfolio as a result of the government's heightened regulatory crackdown.