Buffett, Soros continue to buy stake in companies

NEW YORK: In the midst of people selling their stocks as market values touch the nadir, legendary investors-- Warren Buffett and George Soros-- seem to be swimming against the tide and shopping for stakes in companies worldwide. With the economic crisis ravaging global markets, the two billionaires are making investments in firms from America to Australia, which are expected to yield long term benefits. As Buffett wrote recently in a newspaper column, a simple rule dictates his buying, "Be fearful when others are greedy, and be greedy when others are fearful." Recently, Buffett pumped in about eight billion dollars in two American corporates. The legendary investor had pumped in five billion dollars to battered Wall Street giant Goldman Sachs and another three billion dollars into diversified conglomerate General Electric. According to reports, Soros snapped up a five per cent stake in Australian firm Sphere Investments. The company is reportedly looking to develop a multi-billion dollar iron ore mine in Mauritania.

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I-banks traded as junk on risk fears

On Wall Street, Bear Stearns, Lehman Brothers Holdings, Merrill Lynch and Goldman Sachs Group are as good as junk.

Bonds of US investment banks lost about $1.5 billion of their face value this month as the risk of owning the securities increased the most since at least October 2004, according to Merrill indexes. Prices of credit-default swaps based on the debt imply that their credit ratings are below investment grade, data compiled by Moody’s Investors Service show.

The highest level of defaults in 10 years on subprime mortgages and a $33 billion pileup of unsold bonds and loans for funding acquisitions are driving investors away from debt of the New York-based securities firms. Concerns about credit quality may get worse because banks promised to provide $300 billion in debt for leveraged buyouts announced this year. “The market is being driven by fear,” said Mark Kiesel, who oversees $80 billion of corporate debt at California-based Pacific Investment Management, manager of the world’s biggest bond fund.

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Investment bankers pay heavy price for China’s broking pie

Overseas banks keen for a piece of China’s red-hot brokerage sector will have to swallow some rich prices to buy into domestic securities firms, which are in no hurry to make deals as they focus on their own share listings. But for investment banks such as Citigroup and JPMorgan, a strategic partnership with a local securities house is a must in the long run, if they want to cash in on China’s rapidly growing stock markets, whose capitalisation has reached nearly 20 trillion yuan ($2.65 trillion), exceeding Hong Kong.

Besides Citi and JPMorgan, banks including HSBC and Credit Suisse are shopping for Chinese partners. Even Morgan Stanley, which launched China’s first such investment banking joint venture in 1995, is eyeing its second deal, banking sources said. “You cannot ignore China if you want to explore new profit streams in emerging markets,” said Philip Leung, a Shanghai-based partner for Ernst & Young.

Mainland China is on track to overtake Hong Kong, as Asia’s biggest centre for initial public offerings this year. Analysts have said, they expected fund-raising by Chinese firms via domestic IPOs to hit 400 billion yuan this year, up from 165 billion yuan in 2006 as Beijing encourages more Hong Kong-listed firms to sell shares at home. Most overseas banks will miss out on the current IPO boom — except for Goldman Sachs, UBS and Morgan Stanley, which established partnerships in China when the industry was still mired in a severe downturn.

Read more in The Economic Times