Hong Kong’s US$700 billion July market sell-off evokes memories of China’s 2015 stocks rout

Hang Seng Index sinks and swims as role transforms into a listing hub for mainland companies

Cathie Wood’s flagship ETF has reduced its US$1.66 billion holding of Chinese stocks by this month while foreign funds exited onshore markets

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Hong Kong’s stock market is more exposed to China risks as it transforms into a listing hub for emerging mainland companies. Photo: Shutterstock images

Published: 4:00pm, 30 Jul 2021Updated: 11:03pm, 30 Jul 2021

Cathie Wood’s US$25.5 billion flagship investment fund began 2021 as one of the most enthusiastic and biggest portfolio investors of Chinese technology companies listed in Hong Kong and the United States.

As June turned into July, enthusiasm dissipated into wariness. Didi Global’s US$4.4 billion New York initial public offering (IPO) on June 30 exploded into a debacle described by Chinese regulators as a “deliberate act of deceit,” a characterisation that promises severe repercussions for the company behind the biggest Chinese stock offering in the US since 2014.

Amid the blow back, Ark Innovation ETF reversed course, trimming its US$1.66 billion holdings of China stocks, from as much as 8 per cent of its portfolio in February to 0.8 per cent as of July 29, according to filings.

Ark’s disposals included 5.9 million shares of Tencent Holdings, 6.8 million shares of Tencent’s games publisher Huya, and 2.7 million shares in the internet search engine Baidu. A stake of 5.4 million shares in real estate platform operator KE Holdings, also known as Beike, has dwindled to a mere 1,270 shares.

The New York-based fund, which invests in what it calls “disruptive innovation,” was one of the scores of US-based institutional investors that grew wary of China’s regulatory crackdowns on the country’s technology champions.