Sunday, September 21, 2008
A reporter friend of mine asked whether I thought the BOC's acquisition of 20% of Compagnie Financiere Edmond de Rothschild signals the beginning of a Chinese buying spree.
Basically, I don't think that many deals will actually happen. Many Chinese banks may run into their own sub-prime problem soon due to falling housing prices (you can read my previous blogs on that issue). Thus, they need to hoard capital for impending write-offs which should take place some time next year. The State Council knows this and will be very careful with approving major acquisitions by commercial banks. In the mean time, the CIC is being very careful due to the Blackstone debacle and the equally embarrassing Morgan Stanley deal. CIC may instruct third parties to take small stakes in a bunch of financial institutions, but it would take a very attractive bargain for them to take a substantial stake in any particular one.
Basically, I don't think that many deals will actually happen. Many Chinese banks may run into their own sub-prime problem soon due to falling housing prices (you can read my previous blogs on that issue). Thus, they need to hoard capital for impending write-offs which should take place some time next year. The State Council knows this and will be very careful with approving major acquisitions by commercial banks. In the mean time, the CIC is being very careful due to the Blackstone debacle and the equally embarrassing Morgan Stanley deal. CIC may instruct third parties to take small stakes in a bunch of financial institutions, but it would take a very attractive bargain for them to take a substantial stake in any particular one.
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