Globalization is not over, don’t just invest in countries ruled by dictators

Russia’s unprovoked war against Ukraine is not a death knell for globalization but a wake-up call for investment risks in non-democratic countries, Texas hedge fund manager Kyle Bass told CNBC on Thursday.

“You don’t have to paint it with a brush extension,” Heyman, founder of Capital Management, told Squawk Box in an interview, when asked if he thought of an interconnected economy with a few barriers to global trade. Effectively finished. “You have to say, every country run by an authoritarian dictator should be re-examined and probably not invested.”

In a letter to shareholders, Larry Fink, CEO of BlackRock, a fierce critic of the Chinese Communist Party, wrote that Russia’s invasion of Ukraine had “put an end to the globalization we have experienced over the past three decades.”

Russia has been facing rapid and sharp economic reactions since late last month after Russian President Vladimir Putin launched a full-scale military strike on neighboring Ukraine. Hundreds of Western businesses have shut down operations inside the country, in addition to government sanctions on Russian officials, financial institutions and oligarchs.

What was once the 11th largest economy in the world is expected to shrink sharply and enter a recession in response to Western economic isolation. The International Finance Institute estimates that Russia’s economy could shrink by 15% this year.

China has not officially condemned Russia’s aggression in Ukraine, and U.S. officials have warned Beijing that it will suffer “consequences” if it supports Russia. EU leaders will meet with top Chinese officials, including President Xi Jinping, on Friday. They are expected to press China to remain neutral in the war.

“I think institutional investors need to bring to light the fiduciary responsibilities because anyone who has invested in Russia has lost everything,” Bass said. “China is on the edge of that razor. … If they make the wrong decision to openly side with Russia here and submit themselves to US sanctions, then US investment in China is questionable.”

China has become an important market for many American companies in the decent decades, Buss noted, as it has become the world’s second largest economy. It is not only an important link in the global supply chain, but also a major consumer market.

However, Bass said the differences between the way US defense and intelligence officials view China were “never as wide as they are on Wall Street.”

“Ultimately, what Putin has taught us is that we need to look at authoritarian dictatorships and really reconsider if the negative convexity – or the negative risk – that we are associating with these potential countries is worth the investment.” Bus Dr.

Bass said he had long believed that the United States and China would eventually become economically separate because the two countries’ foundations were “so hostile to each other.”

“What Putin has done is accelerated. I think in the next year or two, we’re going to learn if that risk was really worth it. I think those who took that risk will realize that they weren’t. It’s not worth it,” he said. .