Kuwait has joined the bandwagon of Gulf sovereign funds eyeing investments in the United States in the wake of the sub-prime credit crisis, particularly in financial services, Financial Times quoted the head of the investment authority as saying.
Prominent among other Gulf countries eyeing sub-prime-hit firms in the West are the UAE and Qatar.
“Perhaps we are in the eye of the storm now and are close to the peak of the problem,” Bader Al Saad, head of Kuwait Investment Authority (KIA), told Financial Times. The KIA will invest the massive surplus of the Middle East’s fourth-largest oil exporter. “We do not see prices dropping much more,” Saad said in the article posted on the FT’s website.
The sub-prime crisis in the United States hit a range of of banks, mortgage lenders, bond insurers and home builders. With oil prices rising nearly five-fold since 2002, Gulf Arab state investment funds are looking to spend some of the windfall on global assets.
The Abu Dhabi Investment Authority, likely the world’s largest sovereign wealth fund, agreed to buy up to 4.9 per cent of Citigroup in November in a $7.5 billion (Dh27.5bn) deal.
“With Citi, the Abu Dhabi Investment Authority had good timing,” Saad also said KIA was interested in Vietnam. “They are learning from the Chinese experience and it is easier to enter Vietnam than other emerging countries,” said Saad.
“We are interested in buying a stake in a financial institution but these stakes are not cheap,” he said.
The KIA was looking at property in secondary cities in China rather than Beijing or Shanghai, while it was cautious about Chinese stocks, added Saad.
“Asset prices in the Chinese equity market are inflated because in China so much money is chasing so few opportunities,” he said.
The Qatar Investment Authority, a $60bn (Dh220bn) sovereign wealth fund run by the government of Qatar, has started scouring the Japanese stock market for good investments, the Nikkei Financial Daily reported.
A QIA executive told The Nikkei that it is also scouting the financial industries in Japan, the US and Europe for firms that have been hit by the sub-prime credit crisis.
The investment authority has already sunk part of its bulging pool of wealth into Japanese real estate and stocks through Western investment banks and private equity funds. But it is now poised to make direct investments in Japanese assets, according to the executive, who spoke on condition of anonymity. As for planned investments in Western financial institutions, which have sustained huge losses from the sub-prime blowout, the QIA is following the lead of the Abu Dhabi Investment Authority, which paid more than $7.6bn for a stake in Citigroup. The QIA plans to buy holdings in financial firms in Japan, the US and Europe that are starving for cash.
The executive said the fund is narrowing down the list of candidates. “Other regional funds are also trying to take advantage of the opportunity to invest.” (Reuters)
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