By Investing in China over the long term is nothing short of a bad idea, according to “Big Short” investor Kyle Bass.
The Hayman Capital founder said he’s still bearish on China, despite the historic run-up in Chinese stocks after Beijing unveiled a fresh stimulus package. That’s because investing in China hasn’t paid off for the last decade, he said, noting that Chinese stocks have only posted gains for five out of the last 20 years.
The Hang Seng Index, which is made up of the largest Hong-Kong listed companies, climbed 16% in just five days after China’s initial stimulus announcement. That brought the gauge to around the same level it was trading at 15 years ago, Bass noted, meaning investors who plowed cash into those stocks back then have barely made money.
“Typically, the biggest rallies are counter-trend rallies, and China’s trend is just been down for so many years,” Bass said in an interview with CNBC on Tuesday. “Investing in communism has never worked in the long run.”
Investors avoiding Chinese stocks also don’t have to worry about geopolitical tensions surrounding the country, such as possible conflict between Beijing and Taiwan, as well as the nation’s growing partnership with other countries, like Russia, Bass said.
“Do I think that the rally could continue? Do I think that stocks could go up more? The answer’s yes, but I equate it to picking up dimes in front of bulldozers,” he said.
Bass added: “Could a communist government goose its market a little more, make it go up? Yes, absolutely. And if you’re a trader, more power to you. If you invest in communism in the long run, you’ll lose every time.”
Bass has been bearish on China for years, previously shorting the Chinese yuan before closing his position in 2019. In the past, he’s told his Twitter followers it was time to “completely cut ties” with China’s Communist party, and has called attention to the ongoing Uyghur genocide.
