If there is one thing that we all seemed to take for granted, it was that the upshot of the credit crunch would be an awful lot of Western assets being owned by sovereign wealth funds.
But it appears that prediction may have been too hasty, and even the sovereign wealth funds may have had enough.
In China, its own stock market has been in freefall, and so has the market in Hong Kong. And it really has been freefall; the collapses over there are far more severe than anything seen in the West. Since August 1, for example, the Hang Seng has fallen from 22,800 points to 19,300, and that is even after allowing for Friday’s big climb. The CSI 300, which had already fallen massively by then, has dropped by around 30 per cent since August 1.
All this has led to a certain amount of dissatisfaction with this investment lark.
Time magazine has headlined: “Why China won’t come to the rescue”, and looking at the prospects of a Chinese investment into Morgan Stanley said the feeling in China right now is: “No. Not again. Not unless you structure a deal in such a way that we simply cannot lose. Otherwise, goodbye.”
According to the Abu Dhabi newspaper, the National, it reported recently: “a major government-owned investment fund in the Gulf is breaking with tradition by redirecting more of the region’s windfall oil revenues into local markets.”
The thing is, the last couple of weeks have seen the unthinkable occur. The collapse of Lehman, the buyout of Merrill, the decisions by the Fed to take ownership of AIG, have left even the wealth owners of sovereign wealth funds shell shocked.
But then again, now the US government is putting $0.7 trillion on the line, it appears investors who say never again, “not unless you structure a deal in such a way that we simply cannot lose,” may have got their wish.
