By Summer Said, Dow Jones Newswires
Monday 11 October 2010
Fund's MD tells local TV station its stake in Zain is not part of Etisalat bid.
Kuwait's sovereign wealth fund didn't receive an offer for its stake in Mobile Telecommunications Co., known as Zain, Al Arabiya television reported Saturday, citing the fund's managing director .
Kuwait Investment Authority's stake in the telecom firm isn't part of an offer by Emirates Telecommunications Corp., or Etisalat, to buy 46% of Zain, Bader al-Saad told the Dubai-based channel.
KIA, however, supports the possible deal which will boost the country's stock exchange, he said.
The fund, which is mainly, targeting emerging markets in Asia, had recently offered to invest $1 billion during the initial public offering of AIA Group, he added.
Sunday, October 10, 2010
Saturday, October 9, 2010
Kuwait Sovereign Wealth Fund Didn’t Get Offer for Zain Stake
By Inal Ersan
Oct. 9 (Bloomberg) -- Kuwait’s sovereign wealth fund did not receive an offer for its stake in Mobile Telecommunications Co., known as Zain, Managing Director Bader al-Saad said in remarks to Al Arabiya television aired today.
Al-Saad said the fund supports the possible deal in which Emirates Telecommunications Corp., known as Estisalt, offered to buy 46% of Zain and said the deal would be a boost to the Kuwaiti stock market. He declined to comment on the price offered by Etisalat. The fund, the Kuwait Investment Authority, holds 24.6 percent in Zain according to Bloomberg data.
Source: www.businessweek.com
Oct. 9 (Bloomberg) -- Kuwait’s sovereign wealth fund did not receive an offer for its stake in Mobile Telecommunications Co., known as Zain, Managing Director Bader al-Saad said in remarks to Al Arabiya television aired today.
Al-Saad said the fund supports the possible deal in which Emirates Telecommunications Corp., known as Estisalt, offered to buy 46% of Zain and said the deal would be a boost to the Kuwaiti stock market. He declined to comment on the price offered by Etisalat. The fund, the Kuwait Investment Authority, holds 24.6 percent in Zain according to Bloomberg data.
Source: www.businessweek.com
Wednesday, October 6, 2010
Japan Stimulus Plan Proposes Japan Sovereign Fund
By Takashi Nakamichi
Of DOW JONES NEWSWIRES
TOKYO (Dow Jones)--Japan's ruling party unveiled an economic stimulus plan Wednesday that calls for Japan to consider making use of its $1.07 trillion in foreign reserves to create a sovereign wealth fund.
In doing so, Japan would join other large foreign currency reserve countries such as the UAE, Russia and China, but would be the first G-7 economy to take such a step. A Japanese sovereign wealth fund has been contemplated in the past, but has always been rejected.
In explaining the reasons for such a move, the plan's chief architect, former trade minister Masayuki Naoshima pointed to the need to get a greater return on Japan's overseas investments. "We are thinking of how we can better employ Japan's foreign reserves," he told reporters late Wednesday.
The proposal is included in a more than Y4.8 trillion package put together by Naoshima and other lawmakers within the ruling Democratic Party of Japan. Other measures include employment support, regional infrastructure projects and steps to reduce the country's dependence on so-called rare earth metals imported mainly from China.
The stimulus is part of a concerted effort by the government and Bank of Japan to keep the economy from sinking back into recession. The government is also taking action to lower the value of the yen while the central bank Tuesday unveiled a ground-breaking program designed to pump more money into the economy.
Since the DPJ controls the lower house of the Diet, the more powerful chamber of Japan's parliament, the package is expected to be backed by the government. But the prospects for the fund remain doubtful due to a number of potential hurdles.
The most stringent opposition is expected to come from the powerful Ministry of Finance, which effectively killed off a similar proposal in 2008. The ministry is said to be concerned that any wealth fund-style investments would be too risky a use of taxpayers money.
The timing is also less than opportune since the funds would likely need to be diversified out of the dollar, at a time when Japan is trying to support the U.S. currency to hold back a rising yen that hurts exports. It has said that selling dollars would "destabilize" the currency market.
Naoshima said that selling U.S. Treasurys, where Japan currently puts the lion's share of its foreign investments, was not on the cards. "I am not thinking about selling U.S. Treasury bonds," he said.
He also said that the idea of a fund was in its early stages, saying "(we) need to discuss the issue with the government and especially with the Ministry of Finance, which we haven't been able to reach an agreement with."
Analysts also doubt that the government will do anything radical with the reserves. Shifting reserves away from the dollar could fuel its downtrend versus the yen, dealing a blow to an export-reliant economy already reeling from the yen's continued strength.
Osamu Takashima, chief currency strategist at Citigroup in Tokyo, said lawmakers were using the proposal to "show off" to voters that they are aware of the trend in which developing nations such as China use national wealth funds to earn higher returns on their reserves. "It's hard to imagine that the Japanese government will sell U.S. Treasury bonds," he said.
Another key part of the package is meant to reduce Japan's dependence on potentially problematic suppliers such as China for "rare earth" minerals and other natural resources.
Indications that China was unofficially blocking such exports after the two nations squared off in a territorial dispute had worried big Japanese manufacturers. The Chinese government denied limiting exports, but the episode highlighted the importance of the materials for products such as environmental technology where Japan is a major exporter.
The DPJ is also calling on the government to use the reserves of its state-affiliated Japan Bank for International Cooperation to make investments overseas to help Japan secure natural resources, the Nikkei newspaper reported on Wednesday.
Of DOW JONES NEWSWIRES
TOKYO (Dow Jones)--Japan's ruling party unveiled an economic stimulus plan Wednesday that calls for Japan to consider making use of its $1.07 trillion in foreign reserves to create a sovereign wealth fund.
In doing so, Japan would join other large foreign currency reserve countries such as the UAE, Russia and China, but would be the first G-7 economy to take such a step. A Japanese sovereign wealth fund has been contemplated in the past, but has always been rejected.
In explaining the reasons for such a move, the plan's chief architect, former trade minister Masayuki Naoshima pointed to the need to get a greater return on Japan's overseas investments. "We are thinking of how we can better employ Japan's foreign reserves," he told reporters late Wednesday.
The proposal is included in a more than Y4.8 trillion package put together by Naoshima and other lawmakers within the ruling Democratic Party of Japan. Other measures include employment support, regional infrastructure projects and steps to reduce the country's dependence on so-called rare earth metals imported mainly from China.
The stimulus is part of a concerted effort by the government and Bank of Japan to keep the economy from sinking back into recession. The government is also taking action to lower the value of the yen while the central bank Tuesday unveiled a ground-breaking program designed to pump more money into the economy.
Since the DPJ controls the lower house of the Diet, the more powerful chamber of Japan's parliament, the package is expected to be backed by the government. But the prospects for the fund remain doubtful due to a number of potential hurdles.
The most stringent opposition is expected to come from the powerful Ministry of Finance, which effectively killed off a similar proposal in 2008. The ministry is said to be concerned that any wealth fund-style investments would be too risky a use of taxpayers money.
The timing is also less than opportune since the funds would likely need to be diversified out of the dollar, at a time when Japan is trying to support the U.S. currency to hold back a rising yen that hurts exports. It has said that selling dollars would "destabilize" the currency market.
Naoshima said that selling U.S. Treasurys, where Japan currently puts the lion's share of its foreign investments, was not on the cards. "I am not thinking about selling U.S. Treasury bonds," he said.
He also said that the idea of a fund was in its early stages, saying "(we) need to discuss the issue with the government and especially with the Ministry of Finance, which we haven't been able to reach an agreement with."
Analysts also doubt that the government will do anything radical with the reserves. Shifting reserves away from the dollar could fuel its downtrend versus the yen, dealing a blow to an export-reliant economy already reeling from the yen's continued strength.
Osamu Takashima, chief currency strategist at Citigroup in Tokyo, said lawmakers were using the proposal to "show off" to voters that they are aware of the trend in which developing nations such as China use national wealth funds to earn higher returns on their reserves. "It's hard to imagine that the Japanese government will sell U.S. Treasury bonds," he said.
Another key part of the package is meant to reduce Japan's dependence on potentially problematic suppliers such as China for "rare earth" minerals and other natural resources.
Indications that China was unofficially blocking such exports after the two nations squared off in a territorial dispute had worried big Japanese manufacturers. The Chinese government denied limiting exports, but the episode highlighted the importance of the materials for products such as environmental technology where Japan is a major exporter.
The DPJ is also calling on the government to use the reserves of its state-affiliated Japan Bank for International Cooperation to make investments overseas to help Japan secure natural resources, the Nikkei newspaper reported on Wednesday.
Monday, October 4, 2010
Global M&A involving sovereign wealth funds fall in Q3
(Reuters) - Global corporate mergers and acquisitions activity involving sovereign wealth funds fell in the third quarter to $9.2 billion with 24 deals completed, Thomson Reuters data showed on Monday.
Global announced M&A volumes involving state investment vehicles fell 46 percent in the three months ending September from the same period in 2009. In the second quarter of 2010, such volumes totaled $12.5 billion with 37 deals completed.
At the height of the boom in the first quarter of 2006, sovereign wealth funds sealed 35 deals worth $45.7 billion.
After a poor performance during the financial crisis, many sovereign wealth funds have shifted their focus away from aggressive investment abroad and instead put money into assets at home or into "strategic" foreign assets, such as food and energy, that fit in with national economic policy.
Over the past year they also have been expanding their portfolio in emerging and frontier markets, where some of them have invested in long-term infrastructure or resource projects.
(Reporting by Natsuko Waki)
Source: www.reuters.com
Global announced M&A volumes involving state investment vehicles fell 46 percent in the three months ending September from the same period in 2009. In the second quarter of 2010, such volumes totaled $12.5 billion with 37 deals completed.
At the height of the boom in the first quarter of 2006, sovereign wealth funds sealed 35 deals worth $45.7 billion.
After a poor performance during the financial crisis, many sovereign wealth funds have shifted their focus away from aggressive investment abroad and instead put money into assets at home or into "strategic" foreign assets, such as food and energy, that fit in with national economic policy.
Over the past year they also have been expanding their portfolio in emerging and frontier markets, where some of them have invested in long-term infrastructure or resource projects.
(Reporting by Natsuko Waki)
Source: www.reuters.com
Friday, October 1, 2010
Corporate Finance: Sovereign Wealth Funds Prepare To Take More Active Role In M&A
By Gordon Platt
Global Finance Magazine
1 October 2009
Sovereign wealth funds could play a big supporting role as global mergers and acquisitions try to get back on track following a dramatic slowdown in M&A activity during the credit crisis and global recession. While they are not about to become swashbuckling barbarians at corporate gates, SWFs are joining together in “clubs” to cooperate on strategic investments and takeovers.
Qatar Holding, the investment arm of Qatar Investment Authority, joined China’s SWF, China Investment Corporation (CIC), in late August to purchase a $448 million issue of preference shares in UK-based property firm Songbird Estates, the owner of much of London’s Canary Wharf. Qatar aims to become the largest shareholder in Songbird.
“This transaction represents an important step in our drive to build up a diversified portfolio globally of the highest-quality assets across a broad spectrum of asset classes,” Ahmad Al-Sayed, CEO of Qatar Holding, said in a statement.
In June, SWFs from China, Kuwait and Singapore emerged as the deep-pocket backers who enabled BlackRock’s acquisition of Barclays Global Investors for about $13.5 billion. SWFs are increasingly working together to achieve their commercial objectives, according to a survey released in July by UK-based University of Oxford. The operations and strategies of SWFs remain, in many cases, guarded secrets, it said.
China’s foreign exchange reserves have passed $2.1 trillion, and CIC could seek more capital to deploy in lower-cost acquisitions in the wake of the global financial crisis. As central banks amass reserves that are more than sufficient to meet their near-term needs, they are seeking higher returns than are available on US treasury securities.
Second-Quarter Rebound
Global corporate M&A activity involving SWFs rebounded sharply in the second quarter of 2009 to more than $3.6 billion after falling to $1 billion in the first quarter, according to Thomson Reuters. However, the total remained well below the $19 billion recorded in the fourth quarter of 2008. SWFs’ financial investments in troubled US financial services firms were welcomed at the height of the crisis, but issues of disclosure and intent could become more controversial as M&A activity accelerates and broadens in the future.
“From the times when kings invested in building pyramids, raising armies and bankrolling explorers, sovereign wealth attracted political controversy,” says Alexander Mirtchev, president of Krull, an advisory and project management firm based in Washington, DC. “But sovereigns have changed with the times and today represent internationally legitimate public authorities,” according to Mirtchev, who is an independent director of Kazakhstan’s SWF, Samruk-Kazyna.
“Cooperation among SWFs and their managers on different projects represents a sign of their maturity as investors who have become more aware of the market opportunities,” Mirtchev says. “On certain occasions, it could help funds to become market leaders in specific sectors,” he says.
The primary advantage of forming clubs is to spread the risk while increasing potential profits, Mirtchev says. Meanwhile, the co-financing is welcome at a time when lack of financing is the biggest impediment to dealmaking.
Perceptions Change
The investment and political environment in which SWFs are operating has changed dramatically as a result of the global financial crisis, according to a report released in August by State Street, Boston-based provider of financial services to institutional investors. “The unprecedented events within the financial marketplace have significantly changed both the public perception of sovereign wealth funds and the way the funds perceive their own role as very large institutional investors,” says Jay Hooley, president and chief operating officer of State Street. SWFs are facing sizable challenges and opportunities, he says.
The post-crisis reality has created an excellent basis upon which SWFs and the rest of the global financial community can further their cooperation and forge a mutually beneficial coexistence, the State Street report says. “Given the vast pool of assets they represent, SWFs will be important participants in shaping the future of global finance,” it says.
With nearly $3 trillion in financial resources, SWFs are playing a growing role as cross-border investors, and this has provoked considerable debate across the industrialized world, according to State Street. “The rapid growth of these funds, and their status as sovereign-owned asset pools that are neither pension funds nor traditional reserve assets, has ignited a spirited discussion about their governance, accountability and transparency, as well as the appropriateness of government control in investment decision-making,” it says. “These funds raise many issues of international economic policy, but critical to maintaining global prosperity and market efficiencies is maintaining the openness of host and recipient economies and financial systems to cross-border trade and investment,” the report says.
Best Practices Evolve
The International Monetary Fund and the Organization for Economic Cooperation and Development are examining these issues and are developing voluntary best practices for both SWFs and the countries receiving their investments. By providing liquidity and capital to world markets, SWFs can enhance the operation of markets, lower equity financing costs and provide support to equity valuations, State Street says.
Much of last year’s deal activity in the financial services sector involved SWFs taking minority interests in banks seeking capital injections. However, the appetite of SWFs to invest in the US banking sector has diminished significantly because of losses taken on the investments made in 2007 and early 2008, according to a report by PricewaterhouseCoopers. Inbound deal activity in the US financial services industry is likely to come from the stronger Asian strategic buyers, while the European financial services companies continue to focus on addressing their own issues, it says.
The largest M&A deal worldwide in August was the Qatar Investment Authority’s purchase of an additional 17% stake in Volkswagen, and Qatar Holding’s concurrent purchase of a 10% stake in Porsche. The transactions had a combined ranked value of $9.6 billion, according to Thomson Reuters. As a result of the deal, Porsche will set up research and development and testing facilities in Qatar.
Abu Dhabi’s state-owned investment fund, Advanced Technology Investment Company (ATIC), became a major participant in the global microchip industry on September 7 with its cash purchase of Singapore-based Chartered Semiconductor Manufacturing for $1.8 billion. Chartered’s largest shareholder was Temasek Holdings, an investment company owned by the government of Singapore. ATIC is also the main shareholder in Globalfoundries, a US-based joint venture with Advanced Micro Devices. Globalfoundries and Chartered together will create a manufacturer of next-generation chips that will be big enough to compete with Taiwan’s customized chipmakers, which now control about two-thirds of the global contract chip market. Doug Grose, CEO of Globalfoundries, will run the combined operations with Chartered, which makes chips that run the Microsoft Xbox 360 game consoles. ATIC will assume $3.1 billion in debt and covertible shares of Chartered, which posted a loss of $39 million in the second quarter, its fourth quarterly loss in a row.
On a purely portfolio risk management basis, there are legitimate grounds for asset-rich countries to seek real assets through SWFs, according to State Street. These countries holding large foreign exchange reserves need to avoid the risk that official-sector debtors from the industrialized countries will seek to reduce their nominal liabilities through a policy of inflation, it says.
Global Finance Magazine
1 October 2009
Sovereign wealth funds could play a big supporting role as global mergers and acquisitions try to get back on track following a dramatic slowdown in M&A activity during the credit crisis and global recession. While they are not about to become swashbuckling barbarians at corporate gates, SWFs are joining together in “clubs” to cooperate on strategic investments and takeovers.
Qatar Holding, the investment arm of Qatar Investment Authority, joined China’s SWF, China Investment Corporation (CIC), in late August to purchase a $448 million issue of preference shares in UK-based property firm Songbird Estates, the owner of much of London’s Canary Wharf. Qatar aims to become the largest shareholder in Songbird.
“This transaction represents an important step in our drive to build up a diversified portfolio globally of the highest-quality assets across a broad spectrum of asset classes,” Ahmad Al-Sayed, CEO of Qatar Holding, said in a statement.
In June, SWFs from China, Kuwait and Singapore emerged as the deep-pocket backers who enabled BlackRock’s acquisition of Barclays Global Investors for about $13.5 billion. SWFs are increasingly working together to achieve their commercial objectives, according to a survey released in July by UK-based University of Oxford. The operations and strategies of SWFs remain, in many cases, guarded secrets, it said.
China’s foreign exchange reserves have passed $2.1 trillion, and CIC could seek more capital to deploy in lower-cost acquisitions in the wake of the global financial crisis. As central banks amass reserves that are more than sufficient to meet their near-term needs, they are seeking higher returns than are available on US treasury securities.
Second-Quarter Rebound
Global corporate M&A activity involving SWFs rebounded sharply in the second quarter of 2009 to more than $3.6 billion after falling to $1 billion in the first quarter, according to Thomson Reuters. However, the total remained well below the $19 billion recorded in the fourth quarter of 2008. SWFs’ financial investments in troubled US financial services firms were welcomed at the height of the crisis, but issues of disclosure and intent could become more controversial as M&A activity accelerates and broadens in the future.
“From the times when kings invested in building pyramids, raising armies and bankrolling explorers, sovereign wealth attracted political controversy,” says Alexander Mirtchev, president of Krull, an advisory and project management firm based in Washington, DC. “But sovereigns have changed with the times and today represent internationally legitimate public authorities,” according to Mirtchev, who is an independent director of Kazakhstan’s SWF, Samruk-Kazyna.
“Cooperation among SWFs and their managers on different projects represents a sign of their maturity as investors who have become more aware of the market opportunities,” Mirtchev says. “On certain occasions, it could help funds to become market leaders in specific sectors,” he says.
The primary advantage of forming clubs is to spread the risk while increasing potential profits, Mirtchev says. Meanwhile, the co-financing is welcome at a time when lack of financing is the biggest impediment to dealmaking.
Perceptions Change
The investment and political environment in which SWFs are operating has changed dramatically as a result of the global financial crisis, according to a report released in August by State Street, Boston-based provider of financial services to institutional investors. “The unprecedented events within the financial marketplace have significantly changed both the public perception of sovereign wealth funds and the way the funds perceive their own role as very large institutional investors,” says Jay Hooley, president and chief operating officer of State Street. SWFs are facing sizable challenges and opportunities, he says.
The post-crisis reality has created an excellent basis upon which SWFs and the rest of the global financial community can further their cooperation and forge a mutually beneficial coexistence, the State Street report says. “Given the vast pool of assets they represent, SWFs will be important participants in shaping the future of global finance,” it says.
With nearly $3 trillion in financial resources, SWFs are playing a growing role as cross-border investors, and this has provoked considerable debate across the industrialized world, according to State Street. “The rapid growth of these funds, and their status as sovereign-owned asset pools that are neither pension funds nor traditional reserve assets, has ignited a spirited discussion about their governance, accountability and transparency, as well as the appropriateness of government control in investment decision-making,” it says. “These funds raise many issues of international economic policy, but critical to maintaining global prosperity and market efficiencies is maintaining the openness of host and recipient economies and financial systems to cross-border trade and investment,” the report says.
Best Practices Evolve
The International Monetary Fund and the Organization for Economic Cooperation and Development are examining these issues and are developing voluntary best practices for both SWFs and the countries receiving their investments. By providing liquidity and capital to world markets, SWFs can enhance the operation of markets, lower equity financing costs and provide support to equity valuations, State Street says.
Much of last year’s deal activity in the financial services sector involved SWFs taking minority interests in banks seeking capital injections. However, the appetite of SWFs to invest in the US banking sector has diminished significantly because of losses taken on the investments made in 2007 and early 2008, according to a report by PricewaterhouseCoopers. Inbound deal activity in the US financial services industry is likely to come from the stronger Asian strategic buyers, while the European financial services companies continue to focus on addressing their own issues, it says.
The largest M&A deal worldwide in August was the Qatar Investment Authority’s purchase of an additional 17% stake in Volkswagen, and Qatar Holding’s concurrent purchase of a 10% stake in Porsche. The transactions had a combined ranked value of $9.6 billion, according to Thomson Reuters. As a result of the deal, Porsche will set up research and development and testing facilities in Qatar.
Abu Dhabi’s state-owned investment fund, Advanced Technology Investment Company (ATIC), became a major participant in the global microchip industry on September 7 with its cash purchase of Singapore-based Chartered Semiconductor Manufacturing for $1.8 billion. Chartered’s largest shareholder was Temasek Holdings, an investment company owned by the government of Singapore. ATIC is also the main shareholder in Globalfoundries, a US-based joint venture with Advanced Micro Devices. Globalfoundries and Chartered together will create a manufacturer of next-generation chips that will be big enough to compete with Taiwan’s customized chipmakers, which now control about two-thirds of the global contract chip market. Doug Grose, CEO of Globalfoundries, will run the combined operations with Chartered, which makes chips that run the Microsoft Xbox 360 game consoles. ATIC will assume $3.1 billion in debt and covertible shares of Chartered, which posted a loss of $39 million in the second quarter, its fourth quarterly loss in a row.
On a purely portfolio risk management basis, there are legitimate grounds for asset-rich countries to seek real assets through SWFs, according to State Street. These countries holding large foreign exchange reserves need to avoid the risk that official-sector debtors from the industrialized countries will seek to reduce their nominal liabilities through a policy of inflation, it says.
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