Sovereign Wealth Funds from the Middle East and Asia Buy Stakes in Europe and the USA

Sovereign wealth funds from the Middle East and Asia are increasingly buying stakes of European and U.S. companies. Due to the global financial market crisis the shares are available at low prices. Therefore they are very popular among investors from the Middle and Far East. Those state-owned funds run by oil-exporting as well as Asian countries invested more than 43 billion Euros mostly in European and U.S. financial institutions in the year 2007. In the first half of 2008 they had already acquired stakes, worth 21.6 billion Euros. This is the result of a survey conducted by the Centre for European Economic Re-search (ZEW), Mannheim, and Bureau van Dijk Electronic Publishing.

The sovereign-wealth fund Government of Singapore Investment Corporation is one of the biggest investors. During the past months it acquired shares worth about 7 billion Euros in the Swiss bank UBS and invested a further 4.7 billion Euros in the American bank Citigroup. Kuwait Investment Authority, one of the largest sovereign-wealth funds, also commits a large sum to transactions. It holds a stake worth 4.4 billion Euros at the U.S. investment bank Merrill Lynch and it invested 566 million Euros in the Initial Public Offering (IPO) of the financial service provider Visa.

The sovereign-wealth funds are also engaged in the European and U.S. stock exchanges. The Qatar Investment Authority, for instance, acquired a 20 per cent stake at the London Stock Exchange (LSE) and a 10 per cent stake at the Scandinavian stock exchange OMX. Dubai International Financial Centre recently took over a 28 per cent stake at the LSE from the Nasdaq Stock Market.

However, the sovereign-wealth funds or state-controlled enterprises from the Middle and Far East not only invest in the financial sector. They are also interested in industrial enterprises. Only recently the Arabian state-run corporation Saudi Basic Indurtries assumed control of GE Plastics, a U.S. plastics manu-facturer. Furthermore sovereign-wealth funds invest in prestige brands such as Aston Martin or Bulgari. Meanwhile hotel chains, for example InterContinental, are funded by sovereign-wealth funds from the Middle and Far East.

For further information please contact

Dr. Mariela Borell, Phone: +49/621/1235-144, E-mail: borell@zew.de