Cramer: I'm wary of even the hottest Chinese IPOs

  • CNBC's Jim Cramer warns investors about chasing fresh-faced Chinese companies that have recently begun trading on U.S. exchanges.
  • The "Mad Money" host says that investors should see the burgeoning U.S.-China trade war as an obstacle when buying into Chinese IPOs.

Even the company dubbed "the Netflix of China" can't change CNBC's Jim Cramer's opinion on Chinese IPOs.

"In the midst of the trade tensions with the People’s Republic, China-based companies keep coming public here and their stocks have been roaring," the "Mad Money" host said Thursday. "Many of these names, though, [are of] dubious quality."

Those names include iQiyi, a video streaming service provider majority-owned by China's Baidu that came public on the Nasdaq exchange in March. CNBC previously reported that iQiyi helped the U.S. IPO market have its best quarter in three years.

Since its offering, shares of iQiyi have been notably volatile, sinking lower than its $18 offering price on its first trading day, climbing to $46 a share by mid-June, then getting clobbered into the low $30s in late June and early July.

Shares of iQiyi ended Thursday's trading session in the red, down 5.43 percent at $31.19 a share.

While Cramer understood the hype brought about by another Netflix-like investing opportunity, he asked investors to be cautious.

"Hey, who wouldn’t be intrigued by the Chinese Netflix?" he acknowledged. "But this kind of stock is very difficult to value and I think it needs to cool off more before it’s worth even considering."

Another recent IPO that concerned the "Mad Money" host was that of BiliBili, a Chinese online entertainment company that also came public in March.

Shares of the media play peaked at $22 in mid-June after a wave of analysts recommended the stock, but since then, Bilibili has declined to $12.90 a share, just over $1 above where it closed on its first trading day.

"This is why I’m leery of the fresh-faced Chinese IPOs," Cramer said. "These names are too hard to get your head around and too hard to follow closely, even if you’re willing to put in the time and do the research."

And with trade tensions between the United States and China seemingly on the rise, Cramer doubled down on his call that investors should exercise restraint when considering buying into China-based companies.

"At the best of times, I am hesitant to recommend all but a handful of Chinese companies. This is not the best of times," the "Mad Money" host said, referring to his refrain that Alibaba, Baidu and Baozun are the only Chinese stocks he'd buy.

"Here’s the bottom line: even with the recent downturn in newly minted IPOs, the market for IPOs is red-hot and these big deals [will] keep coming," Cramer said. "The next time some fresh-faced IPO catches fire, think about all of the recent turmoil and remember to take profits rather than letting your gains ride, at least on a portion of your position."

WATCH: Cramer's take on 2018's China-based IPOs

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