Ray Dalio says now is the time to buy ‘cheap’ Chinese stocks as Beijing works to revive the economy
- ‘To me the key question isn’t whether or not I should invest in China so much as how much I should invest,’ the hedge fund billionaire said in his LinkedIn blog
- Chinese stocks are looking to recoup some US$10 trillion of losses from the last three years, with valuations hovering near a decade-low
“China’s problems … are manageable by Chinese leaders if they do their jobs well by being both smart and courageous. I think those who guide policy in China will eventually come around to dealing with the problems well,” he wrote.
Dalio’s remarks came as Beijing’s policymakers intensified efforts to revive the world’s second largest economy, which has been hobbled by a property market downturn, local government debt problems and deflation risks.
To be sure, China’s problems could be still be cause for concern as its leaders need to restructure mounting debts or risk a “lost decade” like Japan’s, Dalio cautioned in a separate blog last week. Beijing needs both a deflationary deleveraging to reduce debts and easier monetary policy to support growth, which would be “difficult and politically dangerous” to engineer.
Meanwhile, geopolitical conflicts will also continue to drive global investors to diversify or leave China and to fear being discriminated against globally for being friendly to the country. That means China will continue to face difficulties attracting investment, said Dalio.
Still, none of the problems in China have outweighed its investment appeal, Dalio said, adding that the holy grail of investing is to have good uncorrelated return streams, and China will remain one of the core positions.
“To me the key question isn’t whether or not I should invest in China so much as how much I should invest,” he said.