morning call ... 05 21 2007

Unicredit and Capitalia -both Italy, last target taht can charge premium fees, checking account annual cost is 3 times the cost in U.K -$21.8 bil, 5th largest , 2nd aftrer HSBC in Europea -Finance: stock swap 1.12 for each Capitalia share -take out: cross border is tough, union with France SG is tough because of Nationalism -5.5% preimum, 7% including potential gain -strategy: back to home. 2005 $21 bil takeover of Germany HVB Group China State Investment -buy $3 bil stake in Blackstone. nonvoting share -less than 10% ownership to avoid U.S. government approval. no voting rights. -purpose - clear the reserve and diversify its portfolio, foreign exchange reserve, $1.2 tril, from debt investment -shift strategy: avoid criticism by investing in PE firms How exactly to adjust the investment strategy for the reserves is still being debated in Chinese official and academic circles. Some have advocated a freewheeling approach that would pursue political as well as financial ends -- for instance, by buying stockpiles of minerals that China needs to import. Others have pushed for a conservative style more akin to a pension fund, which could involve buying blue-chip stocks to supplement the current heavy reliance on bonds.