Comments on: GCC Sovereigns: A Little Better off

By: rziemba

rziemba — Fri, 10 Jul 2009 12:04:09 +0000

Joe –

re china’s growth figures – the loan growth has been one of the incredible statistics out of China. H1 loan growth has been equivalent to 25% of China’s GDP. however the first big surge was mostly bills financing that seems to have gone to plug balance sheet liabilities of corporations and doesn’t add capacity or finance expenditure

But now I think there is considerable evidence that the loan surge is reinflating property markets (a big part of the new loans in Q2 went were mortgage loans). China has cut downpayment requirements as part of the attempt to stimulate the economy. also given the political pressures to lend, the risk of defaults seems high. China might not collapse under the loans but it should weigh on growth going forward and possibly add to a boom bust cycle.

but I’ll be watching for exports, investment and reserves next week.

By: rziemba

rziemba — Fri, 10 Jul 2009 11:58:44 +0000

Boat speed – good point. I forgot to post the flows chart!
to put it in perspective, sovereign investors GCC SWFs of Abu Dhabi, Kuwait and Qatar had about $150 billion in new capital in 2008 – most of that likely went to equities, mostly in public markets but also some private placements. in H2 the allocation to fixed income gained.
Saudi Arabia had about another $160 billion, most of it in USD bonds as best one can tell.
this whole area is rather murky.

so they’re small in comparison to global markets but still big compared to certain markets. Globally, Sovereign funds manage between $2-2.5 trillion. hope that helps

By: Nan Huairen

Nan Huairen — Fri, 10 Jul 2009 11:42:01 +0000

Souvereign wealth should be managed with consistency, mathematical precision, under auspicious circumstances and with lots of faith. But it cannot be distributed among subjects.

By: Joe K

Joe K — Fri, 10 Jul 2009 03:41:14 +0000

Hi Rachel. You mentioned commenting on developments in China in the coming days. I just read (a piece on CNBC by Andy Busch) that bank lending in China (“new” lending) was approx. $ 1 trillion in the first half of 2009.

If by new they mean incremental lending, this would be about 50% of 1st half GDP (depending on one’s estimate of GDP in China). If substantially used for consumption and investment, this massive lending would explain a lot of their ability to maintain GDP growth at 6-8%, in spite of the drop in exports.

But surely this debt bubble (if the figures are correct) will eventually crash in China just as it did in the US and many other countries.

Thoughts?

By: Boat Speed

Boat Speed — Thu, 09 Jul 2009 23:30:22 +0000

Thanks for all the info. But what are the implications of reduced swf funds? I’m having trouble putting them into perspective. Do you have a ballpark of what they typically buy and what impact do they may have on the markets.