AP Photo/Mark Lennihan
- George Soros told investors to be wary of Chinese stocks in a Financial Times op-ed on Monday.
- Soros called out BlackRock and MSCI for including big China overweights in their ESG market trackers.
- Soros's warning comes just weeks after BlackRock recommended investors boost Chinese equity exposure to as high as 10% of their portfolios.
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George Soros, the prolific investor and liberal philanthropist, told investors to be wary of Chinese stocks in a Financial Times op-ed on Monday.
In the wake of this year's regulatory clampdown that has crushed share prices, "Chinese financial authorities have gone out of their way to reassure foreign investors and markets have responded with a powerful rally," Soros wrote.
"But that is a deception. Xi [Jinping] regards all Chinese companies as instruments of a one-party state. Investors buying into the rally are facing a rude awakening," he added.
The billionaire investor argued that pension fund managers who ostensibly follow ESG guidelines but invest in Chinese stocks are duping themselves – and their retiree clients.
Soros also called out BlackRock, the world's biggest asset manager, and MSCI, an index maker, for including big China overweights in their ESG market trackers.
"These indices have effectively forced hundreds of billions of dollars belonging to US investors into Chinese companies whose corporate governance does not meet the required standard," he wrote. "Power and accountability is now exercised by one man who is not accountable to any international authority."
Soros's warning comes just weeks after BlackRock recommended that investors boost Chinese equity exposure to as high as 10% of their portfolios. The firm's strategists said that China should now be thought of as outside the usual dichotomy between advanced economies and emerging markets.
But SEC Chair Gary Gensler has appeared more hawkish in recent months, warning investors of the opaque risks of investing in Chinese stocks and announcing new disclosure requirements for Chinese firms seeking US IPOs.
Responding to Gensler's warnings, Soros wrote, "Xi's China is not the China [foreign investors] know. He is putting in place an updated version of Mao Zedong's party."
"No investor has any experience of that China because there were no stock markets in Mao's time. Hence the rude awakening that awaits them."