Cramer says it’s impossible to recommend Chinese stocks in a hostile communist regime
CNBC’s Jim Cramer said Wednesday he can’t recommend investors buy Chinese stocks because the communist government there is a “total wild card.”
Chinese President Xi Jinping “does not like capitalism,” Cramer told “Squawk Box,” saying the leader of the world’s second-largest economy “may be the first totalitarian dictator in a long time.”
Cramer’s comments came as two well-known U.S. investors sent mixed signals on Chinese stocks.
Charlie Munger‘s media and investment firm, Daily Journal Corp., nearly doubled its stake in Chinese e-commerce giant Alibaba, according to a regulatory filing Tuesday. Munger, who turned 98 on New Year’s Day, is also Warren Buffett‘s longtime investing partner.
Meanwhile, DoubleLine founder Jeffrey Gundlach told Yahoo Finance this week that “China is uninvestable, in my opinion, at this point.” The so-called bond king said he’s never invested in China. “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.”
Cramer agrees with Gundlach, saying that it’s “impossible” to think about investing in stocks of Chinese companies against such an uncertain backdrop in China that — even if there’s a good argument to buy them.
“There is a sense that the middle class is going to be do better in China,” Cramer said. “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.”
Those three Chinese companies are listed on U.S. exchanges. However, that could change due to rising political pressure in the U.S. and China. In fact, Chinese ride-hailing app Didi announced in December it would delist from the New York Stock Exchange and pursue a listing in Hong Kong. Didi had gone public less than six months earlier.
China has been conducting a monthslong regulatory crackdown aimed broadly at its internet giants, and it has introduced legislation ranging from anti-monopoly measures to data security. The moves have sent investors scrambling and wiped out billions of dollars in value from China’s tech titans.
Cramer said the U.S. is trying to avoid a “very bad cold war” with China. “I think that President Xi has complete contempt for us, complete contempt for shareholders, and very contemptuous of rich people whom he thinks threaten his power.”
“Charlie Munger is a genius” investor, Cramer said. “But I just can’t do it,” he stressed, reiterating his position that Chinese stocks should be avoided.
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