Cramer: How to Play Chinese IPOs

Despite the fact that he dislikes the Chinese market, Cramer believes there is money to be made in Chinese initial public offerings – if home gamers play their cards right. But the “Mad Money” host cautioned that Chinese stocks usually make terrible investments. They tend to be “destroyers of wealth” because the government does not have enough regulatory frame work to make owning the stocks safe.

“There’s very little corporate governance, informal auditing, and of course, the prospect of government intervention since, remember, it's still officially a communist country,” he added.

So how can home gamers capitalize on Chinese IPOs without taking too much risk?

“You will only make money in these stocks if you get in on the deal,” Cramer noted. “The IPO price is the only price worth paying.”

But these are not stocks to own. According to Cramer’s research, the Chinese IPOs get a pop that lasts a day, but after that it’s downhill. He said the only way to speculate safely is by getting in on the deal and then selling within the first couple of days.

As for non-IPO stocks, Cramer is sticking to his guns and only recommending Baidu [BIDU  121.69    -1.52  (-1.23%)   ], China’s version of Google [GOOG  509.505    -7.225  (-1.4%)   ], as an investment. He thinks the Chinese market is in bear mode until at least September, when he suspects the interest rates may be tightened. If home gamers are looking for another play, he suggests Louisville, Ky.-based restaurant company Yum! Brands [YUM  52.80    -0.90  (-1.68%)   , which owns KFC. KFC, Cramer said, is highly popular in China.
Source http://www.cnbc.com/