Sovereign wealth funds find Asia more receptive

 

Istithmar, a Dubai government-managed investment firm, is considering investments in China as sovereign wealth funds seek to avoid markets in the United States and Europe to avoid political backlash.


"Everyone is aware of the backlash DP World faced in the US and as a result sovereign wealth funds are looking towards non-developed markets to avoid such a backlash," Istithmar's Chief Executive David Jackson told a conference in Abu Dhabi. DP World was forced the US ports of its P&O unit sell in 2006 following a political upheaval.

It acquired six US ports after buying UK-based Peninsular and Oriental Steam Navigation for $6.8 billion (Dh24.9bn) in 2005.

"Countries such as China, where we recently opened an office, are very welcoming to sovereign wealth funds; so more are looking to invest there," he said.

Middle East sovereign and private investment companies - bolstered by record oil revenues in the region - are seeking to diversify their strategies away from western markets in favour of Asia, where growth remains robust.

According to Deutsche Bank, China's economic growth is expected to reach 10.7 per cent in 2007, while industrial growth is seen at 12per cent to 18 per cent this year.

"There is a lack of trust in sovereign wealth funds and better initiatives are needed to curb such suspicions. Countries such as the US, the UK and Germany are very reluctant to allow sovereign wealth funds in," said Jackson, whose Istithmar owns US retailer Barneys, several US and UK properties and a 2.7 per cent stake in Standard Chartered Bank.

The state-run funds, primarily those located in Asia and the Middle East, have made headlines in recent months by acquiring stakes in major banks such as Merrill Lynch and Co, Citigroup Inc and UBS AG (UBS), a major Swiss bank with extensive US operations.

Both Merrill and Citi, which already have received billions in cash infusions from the funds, are currently in talks to receive even more capital from outside investors.

That has raised eyebrows on US Capitol Hill, where lawmakers have more closely scrutinised foreign investments in US companies in recent years. US lawmakers are not alone. A number of European governments have said they are drafting proposals limiting or blocking foreign state-run investments.

Istithmar's international portfolio that touches the Middle East, Asia, North America, and Europe.

Launched in 2003 with a capital of $1.8bn, Istithmar was created to centralise investments made by the Dubai Ports, Customs, Nakheel, Dubai Metals and Mining, and Tejari and Free Zone Corporation.

 

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