China’s cash-rich financial institutions want to extend their influence overseas, but experts say the risks of investing in Wall Street giants have left them deeply wary of coming to the rescue.
Morgan Stanley, desperate for a white knight, is reportedly in talks to sell a 49 percent stake to China Investment Corp (CIC, 中國投資公司), a sovereign wealth fund.
At the same time, separate reports say the US investment bank is also in discussions with Beijing-controlled conglomerate CITIC (中國國際信託投資).
“Crisis is a good opportunity for buying cheap assets,” said Mei Xinyu (梅新育), a leading researcher at a Ministry of Commerce-backed think tank.
Morgan Stanley’s market value shrank to US$24.1 billion this week, he said, adding: “It’s cheap indeed.”
But he also cautioned China has much to consider before plunging in, from the real value of US institutions and the risk that Washington will restrict management and voting rights.
China has already been burned by investing in Wall Street. The US’ finance center was the CIC’s first shopping stop after it was established last year to invest part of China’s US$1.8 trillion in foreign reserves.
The stake they bought in private equity group Blackstone and a 9.9 percent holding in Morgan Stanley are now worth less than half what they paid — US$ 3 billion and US$5 billion respectively.
“The collapse of Lehman Brothers doesn’t mean the bottom of the market,” said Shen Hongpu, an analyst for Cinda Asset Management Corp (信達資產管理公司). “There’s still a couple of months to go and more trouble ahead.”
Sovereign funds, including CIC, justified their early Wall Street purchases as long-term investments, but after this week the argument may no longer hold.
“That view has now been overridden by fears that many companies may not last until the wider market rebounds — there is the perception that companies of any size may fail anytime in coming months,” Sherman Chan (陳穎嘉), a Sydney-based analyst for Moody’s, wrote in a research note.
The risk of investing in emerging Asian markets may now be no greater than the US or Europe, Chan wrote.
Analysts say Chinese institutions are being cautious and not hinting at how they will respond to the latest escalation in the crisis, which began more than a year ago with the US subprime housing crisis and resulting credit crunch.
Transactions by China’s emerging financial titans made public this week sent mixed signals.
The Bank of China (中國銀行) bought a one-fifth share in the Edmond de Rothschild Finance Company of France for 236 million euros (US$342 million), a spokesman for the French bank said late on Thursday.
The country’s largest insurer by premiums, China Life Insurance Co (中國人壽), said on Tuesday in a notice to the Hong Kong exchange that as of June it had reduced its holding in Visa Inc to 3 million shares, down from 6.8 million in March.
The latest turmoil has also highlighted one of China’s unique challenges: how to protect itself from being left with a growing mountain of foreign reserves — and investments — mostly denominated in depreciating dollars, said Shi Jianxun (石建勛), a professor at Shanghai’s Tongji University.
Another major hurdle in keeping Beijing from bailing out Wall Street, he said, is the government would face hard questions at home if it failed to first address China’s sagging markets and own struggling national champions.
This week Beijing took major steps to dismantle that obstacle by removing taxes on buying shares, increasing its stakes in three leading banks and introducing its first interest rate cut in six years.
‘ABUSE OF POWER’: Lee Chun-yi allegedly used a Control Yuan vehicle to transport his dog to a pet grooming salon and take his wife to restaurants, media reports said Control Yuan Secretary-General Lee Chun-yi (李俊俋) resigned on Sunday night, admitting that he had misused a government vehicle, as reported by the media. Control Yuan Vice President Lee Hung-chun (李鴻鈞) yesterday apologized to the public over the issue. The watchdog body would follow up on similar accusations made by the Chinese Nationalist Party (KMT) and would investigate the alleged misuse of government vehicles by three other Control Yuan members: Su Li-chiung (蘇麗瓊), Lin Yu-jung (林郁容) and Wang Jung-chang (王榮璋), Lee Hung-chun said. Lee Chun-yi in a statement apologized for using a Control Yuan vehicle to transport his dog to a
BEIJING’S ‘PAWN’: ‘We, as Chinese, should never forget our roots, history, culture,’ Want Want Holdings general manager Tsai Wang-ting said at a summit in China The Mainland Affairs Council (MAC) yesterday condemned Want Want China Times Media Group (旺旺中時媒體集團) for making comments at the Cross-Strait Chinese Culture Summit that it said have damaged Taiwan’s sovereignty, adding that it would investigate if the group had colluded with China in the matter and contravened cross-strait regulations. The council issued a statement after Want Want Holdings (旺旺集團有限公司) general manager Tsai Wang-ting (蔡旺庭), the third son of the group’s founder, Tsai Eng-meng (蔡衍明), said at the summit last week that the group originated in “Chinese Taiwan,” and has developed and prospered in “the motherland.” “We, as Chinese, should never
‘A SURVIVAL QUESTION’: US officials have been urging the opposition KMT and TPP not to block defense spending, especially the special defense budget, an official said The US plans to ramp up weapons sales to Taiwan to a level exceeding US President Donald Trump’s first term as part of an effort to deter China as it intensifies military pressure on the nation, two US officials said on condition of anonymity. If US arms sales do accelerate, it could ease worries about the extent of Trump’s commitment to Taiwan. It would also add new friction to the tense US-China relationship. The officials said they expect US approvals for weapons sales to Taiwan over the next four years to surpass those in Trump’s first term, with one of them saying
INDO-PACIFIC REGION: Royal Navy ships exercise the right of freedom of navigation, including in the Taiwan Strait and South China Sea, the UK’s Tony Radakin told a summit Freedom of navigation in the Indo-Pacific region is as important as it is in the English Channel, British Chief of the Defence Staff Admiral Tony Radakin said at a summit in Singapore on Saturday. The remark came as the British Royal Navy’s flagship aircraft carrier, the HMS Prince of Wales, is on an eight-month deployment to the Indo-Pacific region as head of an international carrier strike group. “Upholding the UN Convention on the Law of the Sea, and with it, the principles of the freedom of navigation, in this part of the world matters to us just as it matters in the
RSS