Re: CIC investment in Morgan Stanley

On Fri, 21 Dec 2007 01:19:45 -0800 (PST), wlaoye <wolaoye@xxxxxxxxx>
wrote:

Another subservient move. The Chinese put their money in but won't
dare to have a say on how the business is run. The loss may worsen
until the institutions collapse completely and that would mean Chinese
money gone down the drain. Or The Chinese investment may help these
institutions to turnaround. When this happen, US politicians, who now
are closing their eyes over this fund propping up crumbling US
financial institutions, will want the Chinese kicked out. This is
because Chinese sovereign fund's gain is China's gain and this is
against US national interest. In other words, either way, the Chinese
will lose.

With the money in, the right thing for the Chinese to do is to ensure
that these financial institutions employ more Chinese at important
levels of the organisations so that they can acquire the skills and
knowledge necessary to run big, global financial institutions.


Patience, patience. Remember

[http://www.iht.com/articles/2005/08/02/business/unocal.php SHANGHAI:
Cnooc, the giant state-owned Chinese oil company, said Tuesday that it
had withdrawn its $18.5 billion takeover bid for the American oil
company Unocal because of fierce political opposition in Washington.
.....more]

and until a few months ago the strident attacks from the Bush
administration and Congress about China's manipulation of the Yuan and
demands for revaluation of as much as 40 percent?
[For a sense of proportion 40 percent on 1.3 trillion is a USD520
bath, more than enough to solve the subprime banking crisis in a
single stroke !]

Well the ballooning US public debt and her enormous trade deficit with
China were something every one could see coming. USD debt securities
which paid peanuts were going to lose currency exchange value too. So
China took Singapore's example to set up a State Wealth Fund
management body to diversify the state's foreign currency reserves.
USD 700 billions is the first tranche allocated for this. That's a
lot of money and certain to set up alarms about China plotting to take
over key Western institutions and manipulate their economies and power
structures. Taking the Unocal lesson to heart China make a very
cautionary entry into substantial equity stakes in major financial
institutions, a few billion here, 10 billion there.

A 10 percent stake normally qualifies for a voting place on the
governing board. When a financier like Kirk Kerkorian (or any of
those rich jewish guys) has a 10 percent stake in MGM or Chrysler for
example, he calls the shots and makes their CEOs pee in their pants.
The prospect of China suddenly coming in and doing the same will send
alarms all the way through their business elite and through the US
political establishment. So for the initial foray China has to pander
to their fears or else find herself frozen out through legislation and
risk political hostility in other areas. China forgoes a direct
management role and voting rights.

So far around USD 30 billions has been invested in the first round of
redployment of SWFs. Who would have suspected that the scene changed
so suddenly, so drastically and in just a few months. Those once
stellar companies are incompetents and maybe even cheats. China may
lose its investments if those go belly-up. If they don't they will
take years to regain their position (aka no profits and maybe even
write downs).

But I see a silver lining in this. For a USD 30 billion ante China
bought herself an insider front seat row where she can see all that
happens when *** hits the fan. You can't buy this kind of experience
any other time or anywhere else. China may be the only one that has
the money to rescue them and the others in trouble. Ergo instead of
China holding a bag of money and begging western financial houses to
take their money and no questions asked, the tables are turned. They
have to come begging to China for money and that of course will come
with a price, on China's terms. I'll leave it to your imagination as
to what those terms will be.

I don't know the terms of China's investments. But the Singapore deal
with USB seems an excellent model. The part about the first two years
being a straight loan at 9% convertable to shares. It doesn't say
what happens if Singapore declines to take up the conversion but I
would believe Singapore will have left an exit open.

[http://www.forbes.com/2007/12/10/ubs-gic-singapore-markets-equity-cx_jc_1210markets03.html
The Swiss bank is raising a total of 13 billion Swiss francs ($11.48
billion) in fresh capital from two investors. The Government of
Singapore Investment Corp., which invests the city-state’s
foreign-exchange reserves, will contribute 11 billion Swiss francs
($9.75 billion); the other investor was not identified, but was said
by Reuters to be the government of Oman, which has been attempting to
diversify its economy away from reliance on oil production.

The two investors would receive convertible notes that pay an annual
return of 9% before their conversion into ordinary shares two years
after the date of issue. The proceeds would help bolster UBS’s capital
adequacy at the most critical level, its Tier 1 capital.]

.