Buffett and China banks top cash-rich list

Twenty of the largest listed companies in the world are sitting on a combined cashpile of $570bn, demonstrating how some of the world’s biggest groups retain substantial firepower in the current downturn.

However, only 29 of the top 100 global companies by market value have net cash, according to analysis by the Financial Times. But those that do should be in a strong position in a severe downturn that is causing companies to scramble to conserve cash.

The list is led by four financial institutions with Warren Buffett’s Berkshire Hathaway at the top with $106bn in net cash, defined as cash and short-term investments or marketable securities minus debt. Strikingly, the next three positions are filled by Chinese banks with Bank of China, ICBC and China Construction Bank having $101bn, $89bn and $82bn, respectively.

People are divided on what cash-rich companies are likely to do with their money. Some believe that with company valuations at a relative low compared with recent years the time is ripe for acquisitions. If you have the cash, there are some unparalleled opportunities out there. You have rock-bottom prices and some very willing prices.

But some others disagreed and argued obviously the banks are hoarding cash, so why shouldn’t the corporates. Probably both banks and corporates will remain cautious in this global market downturn.

Some cash-rich companies already took actions: Berkshire is one of the exceptions, having already invested in blue chips such as GE and Goldman Sachs. Some other cash-rich companies have looked to take advantage of the relatively low valuations by boosting share buybacks or trying to buy rivals. Microsoft has done both.

However, investors, who were only recently crying out for cash to be returned to them through buy-backs, now care cash position more. They’re being more relaxed with managements in a high net cash position.