NEW YORK (Reuters) – Goldman Sachs Group Inc is expanding in emerging markets to tap their high economic growth rates, though there is a “bubble element” to some of the highest flying assets, Chief Executive Lloyd Blankfein said on Tuesday.
Western banks like Goldman Sachs have long pursued opportunities to invest in developing economies, but many countries in Asia, the Middle East and Latin America are now sources of capital looking for investment at home and abroad.
Speaking at a Merrill Lynch Banking & Financial Services Conference, Blankfein said emerging economies have crossed the “tipping point” in terms of becoming full fledged members of the global capital markets.
“We are determined to grow our footprint in these markets,” Blankfein said, part of a strategy he called “chasing GDP around the world.”
Goldman is opening or expanding offices in Mumbai, Moscow, Sao Paulo, Dubai, Doha and, soon, Tel Aviv, Blankfein said. Goldman has invested about $1 billion on its India business, he said, and it is still negotiating a joint venture with Saudi Arabia’s largest commercial bank.
Goldman has obtained broker-dealer licenses in China, India Russia, Brazil and South Korea, which will let it pursue a range of financing and banking businesses.
In other moves, Blankfein said it is expanding its private wealth management business in many of these countries, building ties to a new generation of entrepreneurs, who may also become banking clients.
In addition to on-shore wealth management in China and Brazil, Blankfein said Goldman is expanding its Swiss bank unit to attract more offshore assets from investors in the Middle East, Russia, Latin America and Asia.
He acknowledged, though, that investors should be wary of the high valuation of some “BRIC” country markets.
“When you look at the valuation of companies, such as Indian and China IPOs, compared with very similar companies from more developed markets, there are bubble elements. This you can see.”
Still, he said, these markets offer great rewards in exchange for the high risk.