Gundlach Says China Stocks ‘Worth a Ride’, India Favorite

DoubleLine Capital LP’s Jeffrey Gundlach said the Shanghai Composite Index is “worth a ride” and that the Indian stock market is his favorite in the world.

The manager of the $35 billion DoubleLine Total Return Bond Fund, said today in a webcast that he is “not really afraid” of Chinese stocks for investors with an appetite for riskier investments. “For the long term, my favorite stock market is the Indian stock market.”

The Shanghai Composite fell 0.3 percent to 2,318.55 at 10:41 a.m., halting a seven-day rally. The benchmark index has advanced 10 percent this year on speculation the government will reduce ownership of state-owned enterprises and a link between exchanges in Hong Kong and Shanghai will fuel fund inflows. India’s S&P BSE Sensex index has surged almost 30 percent, climbing to a record on Sept. 8, buoyed by optimism that Prime Minister Narendra Modi’s government will take more measures to revive the expansion in Asia’s third-largest economy.

Gundlach, 54, forecast that yields on U.S. 10-year Treasuries may reach 2.65 percent, with the biggest risk in a rise in yields on German and French debt. Gundlach’s Total Return Bond Fund has returned 5.3 percent this year, outperforming 92 percent of its peers. Over three years, the fund’s 5.1 percent annualized returns have beaten 94 percent of comparable funds, according to data compiled by Bloomberg.

Dollar Bet

It’s “foolish” to own currencies other than the U.S. dollar, Gundlach said, saying DoubleLine has avoided bonds issued in other currencies for years. Investors can protect their capital by not owning foreign currency bonds, he said.

“Dollar-denominated is the way to go.”

Instead of buying junk debt, Gundlach said he would rather own high-grade corporate and government bonds, “and sprinkle in stocks.”

Gundlach, who was named research firm Morningstar Inc.’s fixed-income manager of the year for 2006, started Los Angeles-based DoubleLine in December 2009 after he was fired as chief investment officer of TCW Group Inc. amid a dispute that led to a legal battle.

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