Last night’s bad PMI number seems to have been the tipping point in a recent build up of bad Chinese data that came in last month. This morning, the Nikkei fell by 7.3%, and markets around Europe are down as well.
News from Goldman Sachs earlier this week probably didn’t help either. The bank exited the massive investment it made in the Industrial and Commercial Bank of China back in 2006. It was made even before ICBC became the 2nd biggest IPO in history. The stock, though volatile to say the least, is up 57.1% since that year.
So, even though Goldman has sold off pieces of its stake in ICBC five times since it 2010, with all this bad news coming out about China, it’s hard not to ask — why now? Does Goldman buy the China bear argument that the increasing cost of credit in the country will cripple growth?
Goldman Sachs CEO Lloyd Blankfein was on Bloomberg TV this morning giving a firm answer amidst all the chaos.
Here’s what he told anchor Erik Schatzker:
“Well, first of all, catch the wave when it comes– I don’t know if you’ve been watching but there has been a wave and it’s been going on for quite some time. It may be interrupted. ICBC, again, is not the key to our interest in China or the big reflection of it. ICBC was an investment we made at a time when China was taking its banking system public and was looking for partners– really, kind of quasi-strategic partner– to help– not only provide investment capital but also expertise. And so they wanted firms like ourselves. And there were other financial institutions that partnered with other banks. And so we ended up holding that investment for a while. But through that investment we became very close with important people in the banking system. And we maintain that relationship today. We’re investing in China because China– I was going to say it’s the future– but it’s a big part of the present as well.”
Blankfein went on to say that Goldman would be happy to make an ICBC sized investment again, but the time would have to be right.
Does that calm anyone’s nerves?