Sovereign funds from the Middle East, China, and Singapore have invested tens of billions of dollars in U.S. companies, especially banks and brokerage firms. But, as stocks of those companies have continued to fall, the funds have taken huge losses. No wonder they seem to have stopped investing in America.
On example is Morgan Stanley (NYSE: MS). According to The Guardian, "China Investment Corporation's investment in Morgan Stanley, made just before Christmas, is also facing a significant loss. The securities it picked up for $5bn will convert to stock at $48 to $57 a share in two years' time. At present, however, Morgan Stanley's share price is closer to $42."
Sovereign funds have now also lost money, at least on paper, on Citigroup (NYSE: C), Merrill Lynch (NYSE: MER), Advanced Micro Devices (NYSE: AMD), and several multi-national money center banks based in Europe.
The U.S. government and EU have asked sovereign funds to sign covenants that say they will only make investments for financial reasons, that they have no political agenda when they put money into banks and large companies. Even if these funds agree, their losses are likely to keep them out of the U.S. for a long time. That means the government is pushing to restrict the nature of their investments when Wall Street needs their money the most
Douglas A. McIntyre is an editor at 247wallst.com.
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Reader Comments (Page 1 of 1)
3-23-2008 @ 12:42PM
Mike said...
Give me a break, no one can catch the very bottom of any stocks, they invested in stocks that were beaten down, that will recover in the long run. In five plus years all those stocks will most likely be much higher than what they bought them at. This kind of reporting is so shallow with no substance.
3-23-2008 @ 10:09PM
william lindblad said...
They invested to make money, the same as the domestic people did. They bought into the housing boom and sub prime and have now found about "write down". If they are in no hurry to add money I can't say that I blame them. It does not grow on trees there no more than it does here and there remains an excellent chance that those managers may have some explaining to do also. Investors are investors, world over, and they do not take kindly to feeling duped.
3-24-2008 @ 11:48AM
gumby said...
mike you are right but this is journalism...
This is the very purpose of journalism that is to make readers feel dumbed down which in turn makes at least a few of them want to know more than the journalists cared to.. Most readers usually swallwoed the hooker, sinker and line....tho...