Foreign governments with tremendously high dollar reserves seem to be on the hunt for investments. As the dollar weakens and reserves erode governments find investing in American corporations more and more attractive.
Investment banks seem to be in the spotlight these days after taking painful blows due to the subprime crisis. Apparently stock prices have become attractive enough especially for China and OPEC countries which have significant amounts of dollar reserves and are more the happy to answer the banks’ cries for liquidity.
The Chinese government has just announced, through it’s investment corp (CIC), a $5 billion investment in Morgan Stanley after the latter announced a $9.4 billion write-down on subprime linked investments. This investment follows a 3 billion dollar investment in the private equity firm Blackshire group for just under 10% ownership.
Abu-Dhabi recently purchased a $7.5 billion stake in City Group with what appears to be a change of strategy for the largest oil producer of the Emirates.
I believe the sight of huge piles of dollars depreciating will drive more dollar reserves into high return investments in the west. Are these the first signs of a reversed investing trend from China and the middle-east back to the USA?