Tuesday, June 2, 2009

The Barclays Middle East surprise

As we discussed earlier, Barclays convert is going to get exercised, by the Middle East investors this month. At least some will dump their shares. Come on - if you had made 54% on a desparate bank and hung in through a scary ride, you'd be getting out too. The shares are down 14% this morning. Here is the story from the NY Times:
"A big Middle Eastern investor is selling more than one billion shares in Barclays, the British bank, taking a profit on the investment it made during the financial crisis last fall. Barclays shares fell sharply Tuesday on the news. "

Somehow this was a surprise to the market?

Barclays shares 2-day action

As a general matter, sovereign funds, both in the Middle East and in Asia are done with Western financial companies. They've loaded up, took losses, loaded up again, took more losses. They will be getting out with the right opportunities, but no new investments. The managers of these funds are civil workers. There is little upside for these guys if the performance is strong. On the other hand it's painful and embarrasing when they take a 50% hit. The new flavor of the day is infrastructure and energy. Long-term, private equity-style investing with little visible volatility. That's where sovereigns will focus going forward and we'll be following that development closely.

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