Kyle Bass, an investor, believes that globalization is not yet over, but it is important to avoid investing in countries governed by despots.

• According to Texas hedge fund manager Kyle Bass, the Russia-Ukraine war does not signal the end of globalization, as stated on CNBC.
• He stated that investing in non-democratic countries poses risks and should serve as a wake-up call.
• A week after Larry Fink, CEO of BlackRock, suggested that economic globalization was nearing its conclusion, Bass made his remarks.

Kyle Bass, a Texas hedge fund manager, stated on CNBC on Thursday that Russia's unprovoked war against Ukraine is not the end of globalization but rather a warning about the dangers of investing in countries that lack democracy.

The founder of Hayman Capital Management stated in an interview with "Squawk Box" that the idea of a highly interconnected economy with minimal obstacles to global trade is not entirely accurate. Instead, he suggested that each country, particularly those led by authoritarian regimes, should be reevaluated before investing in them.

A week after CEO Larry Fink wrote in a letter to shareholders that Russia's invasion of Ukraine has ended globalization, Bass, a harsh critic of the Chinese Communist Party, made his comments.

Economic isolation of Russia

Since the start of the military conflict between Russia and Ukraine, Russia has experienced a rapid and severe economic reaction. The Russian government imposed sanctions on officials, financial institutions, and oligarchs, while hundreds of Western companies stopped their operations in the country.

Russia's economy, which was previously the world's 11th largest, is predicted to experience a significant contraction and enter a recession due to Western economic isolation. The Institute of International Finance forecasts that Russia's economy could shrink by 15% this year.

China tries to appear neutral

Beijing is set to meet with top EU leaders on Friday, including President Xi Jinping, and is expected to be pressured to remain neutral in the Russia-Ukraine conflict. Despite condemnation from the US, China has not officially condemned Russia's invasion of Ukraine.

"Institutional investors' fiduciary responsibilities must be highlighted because those invested in Russia have lost everything, and China is on the brink of making a decision that could lead to the loss of all U.S. investment in them," Bass stated.

In recent years, China has emerged as a crucial market for numerous American businesses, as it has expanded to become the world's second-largest economy. Not only does it play a significant role in global supply chains, but it is also a major consumer market.

Putin’s war a lesson on China

The gap between how U.S. defense and intelligence officials perceive China and how Wall Street views it has never been greater, according to Bass.

Bass stated that Putin's message in the end is that we must reevaluate whether the negative risk associated with despotic autocrats is worth the investment.

Bass stated that he has long held the belief that the U.S. and China would eventually grow apart economically due to the fundamentally opposed foundations of the two countries.

Putin's actions have accelerated the process of learning whether the risks taken were worth it, according to him. He believes that those who took the risks will eventually realize that they were not worth it.