Sovereign funds to steer clear of Wall St

By Michael Flaherty - Analysis

HONG KONG (Reuters) - One group conspicuously absent from a last minute deal to scoop up Bear Stearns on the cheap were the sovereign wealth funds that have spent billions of dollars on Wall Street lately.

Given the hundreds of billions of dollars these state-backed funds control, that's bad news for Western firms or any other company hit by the credit crunch that's tightening its grip on the United States and Europe.

The funds look to have steered clear of the deal to rescue the fifth-largest U.S. investment bank, which JPMorgan Chase & Co. agreed to buy for just $2 (0.98 pence) a share on Sunday -- or one-fifteenth of Bear's stock price on Friday.

With no money coming from the Middle East or Asia in the latest deal for a struggling Wall Street bank, analysts said on Monday that sovereign funds are likely to keep away from U.S. financial assets for now.

And it's not just the big funds shying away from Wall Street.

Shares in China's top broker, CITIC Securities, surged on Monday, driven in part by the firm distancing itself from a deal reached last year to invest in Bear Stearns.

As the funds and foreign investors stay away, there could be little comfort for Wall Street workers hoping a foreign investor will help them keep their jobs.

"There's no way anybody's going to catch a falling knife. Why come in now?" asked Craig Russell, Beijing-based chief market strategist at Saxo Bank.