Again, where is ADIA?

The Speaker of Parliament, Mr Abdulaziz Abdullah al Ghurair,
seen here in a file photograph, says the country's wealth fund
should be used to shore up local companies. Ryan Carter / The National

UAE's speaker of Parliament suggested that its country SWF should be used to support its local companies. The article also pointed out what the Kuwaitis and Qataris are doing for their domestic companies. Even Singapore has done so in a more thoughtful and sophisticated way. What happened to the UAE? They are giving new meaning to the adage that silence is golden.

From: The National newspaper
Funds urged to invest at home

James Reinl and Travis Pantin

Last Updated: January 31. 2009 8:53PM UAE / GMT

The Speaker of Parliament, Mr Abdulaziz Abdullah al Ghurair, seen here in a file photograph, says the country's wealth fund should be used to shore up local companies. Ryan Carter / The National

DAVOS, SWITZERLAND // Sovereign wealth funds should begin moving some of their foreign reserves into local companies, says Abdul Aziz Abdullah al Ghurair, the chief executive of Mashreqbank.

Speaking at the World Economic Forum in Davos, Switzerland, he joined other economic leaders in calling for the funds to help meet financing needs, which have intensified since the onset of the financial crisis.

Mr al Ghurair, who is also the Speaker of the Federal National Council, urged the Government to use sovereign wealth funds (SWFs) and “other governmental tools” to pump “more liquidity into the banking system, so banks can continue lending and keep the economy turning”.

“We have built up huge reserves of US$300 billion (Dh1.01 trillion) to $500bn. We can put it into some projects... otherwise when do we spend it? It’s for a rainy day,” he said.

“We have to adjust to [lower] growth. We must review certain projects. We must postpone the kind of real estate orientated projects. Demand is not there. But the Government is committed to accelerate infrastructure projects.”

Several regional funds may have suffered losses on stakes they took during the onset of the crisis in ailing western banks – including Merrill Lynch and Citigroup. Abu Dhabi is home to some of the world’s largest SWFs,the Abu Dhabi Investment Authority and the Abu Dhabi Investment Council, which together control an estimated $328bn, according to the Council on Foreign Relations.

Fund managers in the region would welcome greater investment by wealth funds,according to a recent survey taken by Standard and Poor’s. The agency found that many fund managers expected that purchases by Gulf SWFs would spark a resurgence in regional stock markets.

SWFs are among the few entities with resources that enable them to make large purchases in the face of a global credit shortage. Although nearly every asset class has become unusually cheap in recent months, it is not clear when SWFs will decide to go bargain hunting.

It is also not easy to time such investments, as the Kuwait Investment Authority (KIA) is likely to have already learnt. In January last year, the KIA took a $5bn stake in Citigroup and Merrill Lynch, in what appeared to be an attractive deal. Since then, the fund is reported to have lost as much as 80 per cent of its investment.

Nonetheless, Tony Tan, the deputy chairman and executive director of the Government of Singapore Investment Corporation, one of the world’s largest sovereign wealth funds with an estimated $300bn in assets, said that conditions were favourable for SWFs to get back into the market.

“With many key debt and equity real estate markets pushed to extreme undervaluations, institutional investors like pension funds and SWFs will play an important role in the stabilisation and eventual recovery of asset markets,” Mr Tan said at the Davos conference. “Real money investors, particularly unleveraged global institutional investors, would become relatively more important players” in bank recapitalisation efforts.

Indeed, Qatar may already be on the verge of using its sovereign wealth to buy stakes in companies, and increase its holdings in others, according to the head of the Qatar Investment Authority and prime minister of the country, Sheikh Hamad bin Jassim.

“We are talking with two to three companies at the moment. We are looking for the blue-chip companies,” he said, adding that the country was considering deals in financial services, industry and tourism. “We cannot build all our reserves on one kind of investment, so we have to spread it.”

The Qatari fund has already moved to support markets by increasing its share in local banks to shore up their balance sheets. The Kuwait Investment Authority has also aided the country’s ailing stock market, by investing as much as 1.5bn Kuwaiti dinars (Dh18.74bn).

However, some analysts still say most SWFs will decide to postpone their investments in anything but the safest and most conservative assets for the foreseeable future.s

In a report written for the Council on Foreign Relations, the economists Brad Setser and Rachel Ziemba said that most Gulf SWFs would be looking to increase the share of their portfolios held in foreign currencies. For that to happen, wealth funds will have to turn their attention away from their domestic markets.