Cathie Wood explains her strategy on Chinese stocks in light of the crackdown

Published Wed, Jul 14 20216:24 PM EDT

Ark Invest's Cathie Wood is continuing to unload certain Chinese stocks during the crackdown in Beijing, but the largest actively managed ETF portfolio manager said some companies native to China are safe. "We do believe that China is clamping down," Wood told CNBC's "Closing Bell" on Wednesday. "I don't know if it's capital controls. I do know there's a little bit of a retaliation against the Biden administration's policies that were a continuation of the Trump administration's policies. I think that's been the biggest surprise for China and I think for most investors. We thought the U.S.-China saber rattling would diminish somewhat." China is starting to crack down on its largest corporations and promising to update rules for companies listing on U.S. exchanges . The Chinese government fined technology titans Tencent, Alibaba and newly public Didi for anti-monopoly behavior earlier this month. Didi, maker of a ride-hailing app, tanked when China announced that new users in the country would not be able to download the app while it conducts a cybersecurity review of the company. "What you will not see us do with the Chinese stocks is pull out of the names that are more endemic to China itself," said Wood. "China does want to be a leader in innovation and is very supportive for its companies scaling as quickly as they can internally,." Ark has not sold shares of Chinese companies Baidu , NIU Technologies or Kanzhun recently. Wood has actually been buying into Kanzhun — which went public on June 11 — the Tencent-backed operator of online recruitment platform, which connects job seekers and enterprise users through a mobile app called Boss Zhipin. Meanwhile, flagging concerns about China in a webinar on Tuesday , Ark Invest unloaded 203,847 shares of JD.com that day. The firm also sold 357,583 shares of Tencent on Tuesday. Last week, Wood sold 340,453 shares of Tencent and offloaded 352,991 shares on Monday. Plus, Wood sold 341,190 shares of JD.com last week and another 66,600 shares on Monday. "What I feel is going to hurt at the margin, though, is any company...with more than 1 million users...they're going to be under tougher regulatory scrutiny so I do think that's a valuation downgrade," she added. JD.com, Baidu, Tencent and Alibaba are still top holdings in ARK Autonomous Technology & Robotics ETF , and Wood said most of the selling has been in her flagship fund, ARK Innovation . "When we see an assault, and I would say its on the valuation of many of these names, we will pull out and consolidate towards our highest conviction names," she said about ARK Innovation. "We haven't done that much, except around the margins, with those companies we believe need to expand outside the rest of the world in order to sustain their growth rates."

Cathy Wood

Crystal Mercedes | CNBC