Following up from my post yesterday, this has been talked about since the end of last year – a sale of about a $5 billion stake in Morgan Stanley to a Chinese government sovereign fund. Indeed, China Investment Corporation bought a 9.9% share at the end of last year after Morgan Stanley posted a huge quarterly loss. But this has developed further into a possibility of a 49% share purchase of the institution.
The recent fall of the US dollar meant that the cash-rich Chinese government hoard of currency has taken a bit of a pounding. The recent increase in value would have been somewhat pleasing for those holding US dollars, but I’m pretty doubtful that will continue. Indeed, China might find itself in the position that it’s key markets may have imploded if the USA and Europe are headed for deep and entrenched economies.
The recent bounce in share prices over the past couple of days does not signal increased confidence in the markets in my opinion. I think it is more a function of the ban on short-selling. This is the practice of borrowing shares to sell them, in the hope of buying them at a cheaper price later. As the positions were unwound, this would lead to an increase in price. Two things happened at once in the last couple of days – injection of liquidity into the markets by the central banks and the temporary ban of short-selling. I think they are confounded and that most people are attributing the stock market bounce to the increased liquidity in the system. My hunch is that this is a false attribution.
A lot of analysts reckon this isn’t over by a long shot. I’d have to agree.
Run on Sun, Jul 25
22.34 km (05:58 min/km)
HR 138 bpm - Burned 1,830 C
Cadence 85 spm
