Kyle Bass (Trades, Portfolio), the founder of Dallas-based hedge fund Hayman Capital, appeared on CNBC on Sept. 30 to support a tough approach against Chinese companies listed in the U.S. The guru argued that China signed a special memorandum of understanding in 2013 that companies don't have to do audits or be Dodd-Frank compliant.
Bass is not in favor of banning or delisting Chinese companies, but he does support them having to meet the same regulations as U.S. companies.
The guru also argued U.S. pension funds should not be invested in companies that do not meet standard U.S. guidelines for investment. There are 188 Chinese companies listed in the U.S. Together, they have a market cap of $2 trillion.
Bass is not short any Chinese companies in the U.S. He doesn't have positions in the U.S. or in China. He said he is arguing in favor of uplifting standards because he cares about protecting U.S. investors.
When Chinese investors invest in the U.S., they don't pay taxes. We should think about foreign investors having to pay taxes on their investments that U.S. investors have to pay.
From following Bass'Â media appearances, I do suspect he is heavily short Hong Kong dollars and possible yuan. Here's what he said in a letter that leaked to ZeroHedge and other publications earlier this year:
"The (HK) Buck Stops Here
On the financial front, the leveraged and vulnerable financial structure of the Hong Kong economy is the polar opposite of the average investor’s availability heuristic. Thirty-six years of relative stability won’t beget another decade of stability if our analysis is even partially correct. Meanwhile, China’s extradition overreach is causing tectonic shifts in the fundamental agreements that govern the economic relationships between the United States, the United Kingdom, and Hong Kong.
These shifts have just begun. Investors, Hong Kong depositors, and policy makers alike need to pay strict attention to the outcome of this legislative dance between China and Hong Kong. Hong Kong is currently the center of China’s ability to raise US Dollars in Asia. China is desperately short of US dollars and, therefore, needs Hong Kong to remain a non-tariffed most-favored-nation trader with the United States and the United Kingdom.
Financial teetering coupled with political uncertainty could abruptly change the complexion of the foundation of investments in Hong Kong and throughout Asia. With all of this in mind, over the past several years, we at Hayman have carefully observed, analyzed, and planned for this type of macro instability. We have devised a portfolio structure that will efficiently hedge investors invested in Hong Kong, China, and the rest of Asia with a carefully constructed set of positions that produce a positive carry but also maintain a massive asymmetry to a negative outcome in Hong Kong and/or China."
Full video here:
Disclosure: No positions.Â
Read more here:
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- Ray Dalio: End of the Paradigm of Central Banks Driving Markets
- National Energy Services Is Potential Beneficiary of Further Middle East Tension
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