Goldman: short East, long West?

March 24, 2009

FINANCIAL/GOLDMANSACHSFew can claim to have ever gotten very rich betting against Goldman Sachs. The bank is reported to be cutting its stake in Industrial and Commercial Bank of China and perhaps buying into exchange-traded funds provider iShares.

The Wall Street Journal reports Goldman and ICBC have been talking. Goldman’s 4.9 percent stake in ICBC is worth about $8.5 billion. The timing of a sale seems right, as a lock-up period tying Goldman’s hands ends late next month. The Journal reported Goldman could raise more than $1 billion by selling 15-20 percent of its holding.

Over the last few months, others have also beaten a retreat from China and other points East as risk aversion has grown to dizzying heights. But other financial heavyweights, notably Citigroup, had to repair tattered balance sheets, while Goldman appears to be acting from a position of relative strength. The New York Times reports Goldman plans to pay back the $10 billion it borrowed from U.S. taxpayers last fall — perhaps within the next month.

And a stake sale sanctioned by Goldman’s rocket scientists hardly indicates the direction of the herd. A vocal band of revolutionary economists and financial wizards expects China to take over from the United States as the global growth engine and is adding to bets in the People’s Republic. HSBC recently redistributed some of its wealth into China after cleaning house in the U.S. mortgage-banking market.

Goldman is in talks with Barclays about buying the British bank’s iShares unit, a source familiar with the situation said, adding another name to the growing list of possible bidders. Sources said over the weekend that private equity groups Hellman & Friedman, Bain Capital and TPG had all shown interest in iShares, so a rare bit of pricing power could be emerging for the Barclays unit, which could raise up to $5 billion.

Deals of the day:

* Consulting firm BearingPoint Inc said it agreed to sell a large portion of its public services unit to Deloitte for $350 million.

* Stifel Financial Corp said it would acquire up to 55 branches of UBS Wealth Management Americas to expand across the United States in a deal that will boost the investment bank’s profit in the first year.

* Global energy giants BP, Eni and Shell are eyeing possible bids for Australia’s No.3 oil and gas firm Santos, which one analyst valued at around $7 billion, but a bid from China looks unlikely, dealmakers say.

(PHOTO: The flags of the U.S. and China hang outside of 85 Broad Street, headquarters for the investment bank Goldman Sachs in New York, October 23, 2008. REUTERS/Brendan McDermid)

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