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Bond King Gundlach Says China Is "Uninvestable"

china uninvestable
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EDITOR'S NOTE: Wall Street recognizes China as the second-largest economy in the world. A behemoth that’s risen above almost all other global contenders, economically and militarily, China, its strength, is unquestionable. So why is bond king Jeffrey Gundlach claiming that China is “uninvestable”? According to him, the factors powering China’s greatness—the system, ideology, and government that allows its version of capitalism to flourish—happen to be its greatest risk factor. Gundlach shows how investing in Chinese companies is tantamount to investing in its government. It’s not so much a matter of an opposing ideology but, instead, a matter of trust in the reliability of the data they present, in the business's ability to operate freely, and ultimately, in the safety of your invested money in the hands of the Chinese government. Investors beware.

Investors may want to think twice about putting their money to work in China, contends DoubleLine founder Jeffrey Gundlach. 

"China is uninvestable, in my opinion, at this point," the bond king told Yahoo Finance in an interview at his California estate. "I've never invested in China long or short. Why is that? I don't trust the data. 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."

Gundlach's comments came ahead of DoubleLine's third annual Roundtable Prime investor event on Tuesday.

Some of Gundlach's concerns on China played out in grand fashion last year. 

The ongoing crackdown on the operations of big Chinese internet companies such as Didi by the government has rocked investors in the space. The clamping down on the country's biggest tech names has now led to a tightening of listing requirements by the Chinese government. 

To that end, Didi plans to delist from the New York Stock Exchange later this year not too long after a disastrous IPO (in large part because of Chinese authorities). 

DoubleLine founder Jeffrey Gundlach (right) tells Yahoo Finance investors need to carefully watch the yield curve.
DoubleLine founder Jeffrey Gundlach (right) tells Yahoo Finance China is uninvestable. (Photo: Yahoo Finance)

Meanwhile, the long reach of China's government also hammered after-school tutoring companies such as TAL Education Group — shares of the name plunged about 95% in 2021. 

All of this is in addition to China's ongoing fight against the rise of cryptocurrencies. 

The investing headwinds in the country show up in how the country's key indexes performed in 2021. 

For instance, the Golden Dragon Index — which tracks the performance of mid- and large-cap Chinese stocks — plunged about 49% in 2021. The Wall Street Journal points out the total value of China's onshore stocks rose 20% in 2021, underperforming the S&P 500's advance. 

Gundlach is increasingly more optimistic on emerging markets, minus China (which he doesn't think is an emerging market anymore). 

"I kind of think the next move, the big move is to enter emerging markets. We've been in zero emerging market equities this whole time. And, we've been underweight until very recently emerging market debt as well," added Gundlach.

Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

Originally posted on Yahoo Finance.

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