Europe as a Macro Risk Play

With European markets off their highs and skepticism around some sovereign debt, some countries may find this as a good opportunity to diversify their holdings as a relatively cheap price.  Reports suggest that China ha diversified away from US assets more since the beginning of this year, possibly putting money to work in the Euro zone.  Japan has expressed interest in the participation of any future bailouts as a tool to diversify their holdings and get better returns.  I am not too sure this would be a buy signal for many retail investors as the reasons for these purchases are more for diversification purposes than the prospects of great returns for the risk.  Any participation could help peripheral countries when the time comes to issue more debt, as the interest from international buyers could help replace the skepticism of domestic buyers.  One should also be thinking of the Middle Eastern sovereign wealth funds that started buying up ‘undervalued’ US assets in 2008, where their investment decisions were mixed.