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Bond King Jeffrey Gundlach Does Not Find China an Attractive Investment

Jonathan loves talking politics, economics and philosophy. He carries unique perspectives on everything making him a rather odd mix of liberal-conservative with a streak of independent Austrian thought.
Published: January 6, 2022
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BEVERLY HILLS, CA - OCTOBER 03: CEO of DoubleLine Capital Jeffrey Gundlach and Contributing Editor at Vanity Fair Bethany McLean speak onstage during Vanity Fair New Establishment Summit at Wallis Annenberg Center for the Performing Arts on October 3, 2017 in Beverly Hills, California. (Photo by Matt Winkelmeyer/Getty Images)

With many Chinese stocks having fallen massively in share value over the past year, some investment experts are advising people to bet money in these stocks by calling them an attractive opportunity. However, Jeffrey Gundlach, the founder of investment firm DoubleLine Capital, thinks otherwise. 

In an interview with Yahoo Finance, the billionaire investor, also known by the nickname “Bond King,” warned that China was “uninvestable” in the current scenario. He also revealed that he has never actually invested in the Asian country.

“I don’t trust the data. I don’t trust the– I don’t trust the relationship between the United States and China anymore. I think that investments in China could be confiscated. I think there’s a risk of that. I mean, China is the– China’s ascendancy has been in lockstep weirdly with the deteriorating fiscal condition of the entitlement programs of the United States. I wonder if that’s not some causality in there,” Gundlach said in the interview.

The bond king warned about China’s military development. In terms of tech like hypersonic weapons, the Chinese are “far ahead of us.” When China becomes the country with the world’s largest economy and the largest military, Beijing will likely go for “a seat at the table of reserve currency,” which he believes has been the goal of China “for a long time.” 

The U.S. dollar reserve currency situation is getting “more near the end game.” Gundlach expects the dollar to get massively weakened when the next recession hits.

Jim Cramer, a CNBC host and co-founder of TheStreet.com, also agrees with Gundlach. While speaking to Squawk Box, Cramer said that it is “impossible” to think of investing in Chinese companies given the present uncertain situation in the country. 

He called the Chinese communist regime a “total wild card” and suggested Xi Jinping might be the first totalitarian dictator in a long time.

“There is a sense that the middle class is going to do better in China… Alibaba is going to do well. JD is going to do well. Baidu could do well. But that doesn’t mean their stocks can translate into doing well,” Cramer said.

In an interview with CNBC, UBS Global Wealth Management’s Kelvin Tay said that though Chinese stocks look “very, very attractive” at present, the shares are unlikely to see any quick rebound over the coming few months due to the lack of “catalysts.” 

Tay believes the Chinese property market first needs to settle down before any strong market uptrend kicks in. Negative news regarding the real estate sector can build up negative sentiment in the market, thus making it hard for stock prices to give any substantial upside.

“We do think that things are actually starting to turn around but it’s just that, you know, on the issuers front. On the Chinese high-yield front, you’re probably still going to get some news, some negative news on a couple of developers blowing up, filing for defaults, filing for bankruptcies… If sentiment is fragile in the Chinese market right now, any small negative news is likely to be amplified and become big, and that in turn is going to actually affect the market as a whole,” Tay said.

Speaking to Barron’s, investor Carson Block pointed out that many institutional investors had falsely convinced themselves that they were somehow indispensable to the communist regime, which has “clearly proven to be untrue.” 

China will only treat foreigners well “as long as it feels it needs to.” Those who are considering investing in China will not only be subjecting themselves to the dictates of the communist dictatorship but also the U.S-China relationship that is headed in “the wrong direction.”