Skip to main content

The world is changing... Is it good?

It is now official - the world is changing, and Asia is leading this change.
First it was Middle East, then Singapore, and now China is joining the race to bail out the ailing Western financial institutions. China Investment Corp. (CIC), a sovereign wealth fund (SWF) will be holding up to 9.9% of Morgan Stanley shares by injecting as much as USD 5 bln. Rejoice the West, the East is coming to help you! Or is it?

SWF accumulate government money that come from oil, trade or other sources, and therefore cannot be independent in the way they conduct their investments. They are formed by governments and work for them. And if Middle East and Singapore have long-lasted business relationship with the West, and can be at least to some extent expected to stay within the limits of business practice accepted in the West, can CIC be trusted just as much?

CIC was established this year, and instantly made headlines by investing into Blackstone Group LP at the time of IPO. They later made losses as the stock price plunged. It is headed by Lou Jiwei, a former Deputy Secretary General of the State Council, and is therefore susceptible to political influence. In the world where China is growing increasingly assertive, is giving away a close-to-ten-percent stake for cash injection a good idea for Morgan Stanley?

It may facilitate doing business in China, but it will surely introduce a risk of being caught between the beetle and the block of the US and China's political interests. Will it happen? Let's see...

Comments

Anonymous said…
Japanese are leading again. Nice article in WSJ today.

Popular posts from this blog

Investment Banking Series: Equity Story

Investment Banking Series Post 6 Equity Story 1. What is it anyway? Equity Story is, in its essence, the reasoning why the particular stock should be bought by investors. It emphasizes the strong side of the company and places the stock in either the value or the growth category. In a nutshell, the value stock is expected to have little price appreciation, but pay out relatively high dividend, whereas the growth stock is expected to have a high appreciation potential, but not necessarily pay much dividend. How a stock is classified depends on several factors, such as where in the industry life cycle it is, what the macro conditions are, what industry it belongs to, or sometimes even if it has a hot buzzword in its description. For instance, a power generation company would usually be classified as a value stock: there is very little growth potential, but the cash flows are steady and not as much correlated with the economic conditions. An Internet portal or a biotech company ar...

Investment Banking Series: Pitch Books

Investment Banking Series Post 3 Pitch Books 1. What is it anyway? A pitch book is the paramount of days and nights of a banker's hard work. It is a marketing tool that tries to set apart basically very similar banks and to support the claim that THIS bank, and NO ANY OTHER should be selected to arrange the deal. They say pitch books used to be actual books, but in the present world they are Power Point presentations printed out and bound in a plastic cover. The main purpose of the pitch book is to deliver two messages to the prospective client: (1) "we understand your business very well", and (2) "when it comes to arranging your deal, we are the best fit". Both claims are usually weak at best, but they are made elaborately and extensively, and the resulting multi page document often looks impressive. 2. Typical structure A pitch book will have varying structure depending on what product is being proposed, but there is a lot of similarities. Below is o...