City & Business: Crash lifts the curtain on new market players

The worldwide stock market crash and recovery has spurred more talk about the globalisation of financial markets. A sneeze in Hong Kong leads to a cold in New York, which leads to 'flu in London, which leads to pneumonia back in Hong Kong.

Hedge fund manager George Soros explained it this way in the current issue of the New Statesman: "What global competition has done has been to benefit capital at the expense of labour, and to benefit financial capital to the detriment of fixed investments, because capital is more mobile than labour, and financial capital is most mobile of all."

Asked what is to be done about this, Mr Soros replied: "international political co-operation to match the globalisation of markets".

Mr Soros, however, and others expounding on globalisation - the sloshing of hot money round the world - may be yesterday's men when it comes to explaining what is happening in financial markets. On Thursday the New York-based Soros Fund Management announced a loss of $2bn (pounds 1.2bn) as a result of the market meltdown.

The only high-profile investor to emerge from the crash and rebound with his reputation enhanced was Warren Buffett, who moved into bonds this summer when share prices were at their peak. Mr Buffett never talks about globalisation. He is not known for his sophisticated hedging strategies. What he knows about and talks about is investing in overlooked local companies whose value has gone undetected by other investors.

But isn't there money to be made during a crash and rebound? There is, but only if you ride the curve of truly hairy volatility the right way. The problem is, the events of the past 10 days suggest this is getting ever harder.

On Tuesday, as markets rallied, three powerful new players came into their own. The most obvious of these were the Chinese. No one yet knows how to read Peking or Hong Kong under Peking.

Less obvious, but still evident, were the multinational companies whose shares were yo-yoing up and down in vicious markets, but which are now sufficiently cash-rich to fight the bears by buying back their shares.

Least obvious was the US government. Treasury Secretary Robert Rubin and President Bill Clinton offered carefully crafted public statements to calm market fears. US Federal Reserve chairman Alan Greenspan mopped up with another bravura performance before the US Congress on Wednesday. What investors would really like to know, however, is what conversations Washington officials had in private with corporate executives and Wall Street houses.

Maybe George Soros is not yesterday's man after all. Maybe the "international co-ordination" he says is necessary to tame global markets is already happening, but we simply haven't been told.