The president of China’s leading sovereign wealth fund has said that his firm has stopped buying sovereign debt from countries in the Eurozone. Chinese investment firms considered enforcing this policy in previous months, but hesitated to implement a new policy until they witnessed further concerns. The political turmoil in Greece and other Eurozone nations right now has created enough of a crisis for investors to refrain from investing in the sovereign debts of those struggling nations.
However, President Gao Xiqing said that his firm has not entirely given up on investing in the Eurozone. Many companies in the region show strong fundamentals and could create solid long-term growth.
The national crises in the Eurozone seem to be continuing to get worse. The IMF and ECB have been trying to save Greece from bankruptcy for two years. Nevertheless, the bailout initiatives those countries have implemented have clearly failed to inspire the changes they were hoping for. In fact, many citizens have been rioting against the austerity measures and many politicians are starting to do the same.
At the moment, Greece hasn’t even been able to select a new government. The people of Greece were unable to select a new leader in Sunday’s elections, which has forced the world to consider the possibility Greece will be forced to default in the next few months. A new politician would likely agree to uphold the terms of the IMF, ECB and other lenders in order to gain the backing of their constituents. However, in doing so they will likely be barring themselves from any future bailout arrangements. Without bailouts, they will be forced to default on their current loans.
According to Gao Xiqing, his firm has decided to move away from European markets a couple of years ago. They have looked towards emerging markets in the South Americas and Asia. At this point, they may be near phasing European investments out of their portfolios completely.
Although Xiqing is still moving away from European securities, the Bank of China has a different point of view. The central bank has said that it continues to invest in the ECB in order to sustain the value of its existing European investments.