Billionaire investor Mark Mobius cautions investors on Chinese stocks as the nation heads for a ‘Mao-type’ economy

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Mark Mobius

  • Mark Mobius warned investors should be cautious about Chinese stocks, as the nation is headed for a “Mao-type” economy.
  • That came after Xi Jinping secured another term as president, sparking fear he would continue to borrow from Mao’s socialist principles.
  • “[Chinese stocks are] very cheap in many cases, but I would be very careful,” Mobius added.

Investors should be cautious about Chinese stocks, as the nation is headed for more of a “Mao-type” regime, billionaire investor Mark Mobius warned.

“I am still cautious because I think we’ve got some really big political changes taking place in China,” he said in an interview with CNBC on Monday, shortly after President Xi Jinping solidified a third term in office at the 20th Communist Congress and installed several loyalists in a key leadership committee.

That’s sparked fear that Xi will hold even greater sway over China’s economy, which has slowed considerably amid lockdown restrictions and his “common prosperity” agenda. The latter borrows heavily from the influences of former President Mao Zedong, who is credited with transforming China into a socialist economy.

“I think there’s going to be shift towards more of a Mao-type China than a Deng Xiaoping-type China,” Mobius said, referring to Deng’s market-based reforms of China’s economy away communist principles.

“Less capital oriented, less market-oriented. I think we have to be very cautious still on China. I’m not saying stocks are not cheap. They’re very cheap in many cases, but I would be very careful,” he added.

Investors have already felt some pain, with Xi’s consolidation of power resulting in a major sell-off in Chinese stocks this week. The Hang Seng Index fell 7% to a 14-year-low, leading China’s 13 wealthiest to lose a collective $12.7 billion on Monday.

Mobius also noted that China is still emerging from lockdown restrictions, which has led the International Monetary Fund to estimate just a 3.2% growth for the nation’s economy this year. That could spell trouble for its markets, particularly since the nation has withheld some key economic data and delayed other metrics, including GDP figures.

“That’s not a good sign … That means something is boiling behind the surface and it’s not going to be good,” he warned.

Mobius added he was looking at other investment opportunities in India and Taiwan, given the quality of companies with discounted stock prices.

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