This is the question spooking many Chinese financial institutions, ranging from insurance companies to banks and the country's sovereign wealth fund, China Investment Corporation (CIC).

"We would like to take a more conservative approach in overseas investment. I don't think the overall picture is clear as the impact of the subprime crisis is yet to fully unfold," says Liu Lefei, chief investment officer with China Life, the country's largest life insurer.

China Life has been talking to many international financial institutions since last year, including Fortis, on merger and acquisition opportunities, says Liu. "But we would still like to wait and see for a more appropriate timing."

According to Pan Gongsheng, an ICBC executive in charge of the bank's merger and acquisition business, US financial institutions battered by the subprime mortgage crisis may also be on the ICBC's shopping list if "such a deal facilitates our strategic development".

China's US$200 billion sovereign wealth fund also plans to invest in large financial companies troubled by subprime mortgage defaults.

"I have noticed some sovereign wealth funds have injected capital in financial institutions reeling from the subprime shock. They are doing so from a long-term investment perspective, and in the process stabilizing the market. CIC will also do the same," CIC Chairman Lou Jiwei had said earlier.

Lou's comments came after Abu Dhabi Investment Authority said it will buy a US$7.5 billion stake in Citigroup to help buoy its capital base eroded by credit market losses.

But when is the right time for such investments?

According to Robert Diamond, president of UK's third largest bank Barclays, the market situation in the second half of 2008 may be much better. "The first six months of this year will be extremely difficult and challenging because there's too much uncertainty in the market. These factors include the exposure and earnings of big banks and the future of the US economy," Diamond says.

"However, I believe there will be just short and shallow corrections rather than a long-term correction or recession in the US economy, thanks to Federal Reserve's very bold and early action in cutting interest rates and a huge fiscal stimulus package in the United States. So, the market may bottom out in the second half."

Yin Jianfeng, associate professor with the Institute of Finance and Banking under the Chinese Academy of Social Sciences, says: "I believe the market will see a strong rebound in the fourth quarter, and Chinese enterprises should grab this opportunity."

But according to John Hooper, CEO of nabCapital, it is still too early to talk about mergers and acquisitions. "I am not optimistic about this year's market as the subprime crisis has spread from the credit market to the bond sector. Because of such huge uncertainties, I would still like to wait and see."