Foreign investors with deep pockets are getting skittish about providing further support to the U.S.'s ailing financial sector:
I figured this out before CIC's officials did, so I'm probably qualified to run that firm. The balance sheets of U.S. financial firms are loaded with too many junk assets to make their stocks palatable as investments. This candor from China's sovereign wealth fund further supports a point I have belabored here before. SWFs are now too focused on supporting their home economies and too dismayed with previous investments to support further U.S. bailout efforts.
The CIC's skepticism will make it a lot harder for Secretary Paulson to ask China to strengthen its currency:
What incentive can the U.S. give to China to strengthen the yuan? Specially priced sales of U.S. nonfinancial companies that go bust? China is in the catbird's seat in so many ways.
Nota bene: Anthony J. Alfidi is long FXI (with covered calls).
“I don’t dare to invest in financial institutions now,” Lou Jiwei, chairman of China Investment Corp., said today at a conference in Hong Kong. “The policies of the developed nations on these institutions are not clear. Until they are clear, I don’t dare to invest in them. What if they go bust? I will lose everything.”
I figured this out before CIC's officials did, so I'm probably qualified to run that firm. The balance sheets of U.S. financial firms are loaded with too many junk assets to make their stocks palatable as investments. This candor from China's sovereign wealth fund further supports a point I have belabored here before. SWFs are now too focused on supporting their home economies and too dismayed with previous investments to support further U.S. bailout efforts.
The CIC's skepticism will make it a lot harder for Secretary Paulson to ask China to strengthen its currency:
The fifth round of the Strategic Economic Dialogue between China and U.S. is a swansong for Paulson, who initiated the talks and will exit with the Bush administration. The currency appreciation that he’s applauded -- a 20 percent gain since the end of a peg to the dollar -- may be wound back as President Hu Jintao seeks to protect exporters from the global recession.
What incentive can the U.S. give to China to strengthen the yuan? Specially priced sales of U.S. nonfinancial companies that go bust? China is in the catbird's seat in so many ways.
Nota bene: Anthony J. Alfidi is long FXI (with covered calls).
