Gulf SWFs gain $81bn in 2010

ADIA’s assets increase by around $30 bn due to high oil prices

Strong crude prices allied with a recovery in global markets to boost the combined assets of sovereign wealth funds (SWFs) in Gulf oil exporters by nearly $81 billion in 2010 and the wealth is expected to swell further in 2001, according to a key Western financial institution.

The Abu Dhabi Investment Authority (ADIA), one of the world’s largest SWFs, is projected to gain around $30 billion at the end of 2010 while other government funds in the region will record sharp rises in assets, the Washington-based Institute of International Finance (IIF) said in its quarterly report.

From around $728 billion at the end of 2009, the combined assets of ADIA, Kuwait Investment Authority (KIA), Qatar Investment Authority (QIA) and Oman Reserve Fund (ORF) are estimated to reach $809 billion at the end of 2010.

The level will account for more than half the Gulf’s foreign assets, which are estimated at around $1,542 billion at the end of this year, IIF said.

A breakdown showed ADIA’s assets will swell from around $360 billion at the end of 2009 to $390 billion at the end of 2010.

KIA’s investments will grow from about $296 billion to $320 billion while those of QIA and ORF will rise from $66 billion to $90 billion and from $eight billion to $nine billion respectively, IIF said in its report, sent to Emirates 24/7

It expected their combined assets to swell further to $894 billion at the end of 2011, with those of ADIA surging to nearly $415 billion. KIA’s assets will expand to $350 billion and those of QIA and ORF to $120 billion and $nine billion.

The increase in those assets follows a sharp fall in 2008 because of the 2008 market turmoil. From around $724 billion at the end of 2007, their combined assets tumbled to nearly $630 billion at the end of 2008, the report showed.

IIF said the asset growth this year and in 2011 would be a result of strong oil prices, which expanded the region’s current account and budget surpluses.

It said higher crude prices would push the collective revenue of the six-nation Gulf Cooperation Council (GCC) from around $341 billion in 2009 to nearly $439 billion in 2010 and $461 billion in 2011.

Non-hydrocarbon exports will also increase by about eight per cent to $190 billion, mainly petrochemicals in Saudi Arabia, and re-exports in the UAE.

Imports of goods are projected to increase by 12 per cent to $346 billion, still below the peak of $363 billion reached in 2008, IIF said.

As a result, the current account surplus will widen from $62 billion in 2009 to $119 billion in 2010 and $134 billion in 2011.

As for budgets, the report showed the consolidated fiscal balance is projected to be in a significant surplus, equivalent to 6.2 per cent of GDP in 2010 and 5.7 per cent in 2011 despite the continued large increase in government spending.

 “The large net foreign assets of the region will continue to provide substantial funds to sustain robust government spending levels in the next few years. Benefitting from large current account and fiscal surpluses during the period

2002-2008, gross foreign assets more than tripled to $1470 billion at the end of 2009, with relatively little external debt,” IIF said.

“Slightly more than half of these assets are in the form of SWFs and are largely invested in diversified portfolios of public equities, fixed-income securities, real estate and minority shares in big-name global companies.”

The report expected the GCC’s net foreign assets to rise from $1,049 billion at the end of 2009 to $1,340 billion at the end of 2011.

As for other funds in the region, the report showed the Saudi Arabian Monetary Agency (SAMA), the Kingdom’s central bank, controlled around $410 billion in foreign assets at the end of 2009 and projected them to climb to nearly $437 billion at the end of this year and $468 billion at the end of 2011.

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