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Gulf sovereign investors in “wait-and-see” mode

Top Gulf Arab sovereign investors have been sidelined by volatility in US financial markets with one key fund, Abu Dhabi’s Mubadala, saying on Monday it would not bail out any troubled banks.

Mubadala, one of the region’s most active investors, said the time was not right for investments. The Qatar Investment Authority (QIA), too, was in “wait-and-see” mode, an official close to the authority said.

The comments are some of the clearest indications to date that state-controlled investors like QIA, Mubadala or the Abu Dhabi Investment Agency (ADIA), the world’s largest sovereign wealth fund, will not rush to the rescue of troubled banks. “Mubadala is not looking at any of these financial players that are going through difficulties. There is a good amount of volatility and it is not the best time to invest,” Mubadala Chief Operating Officer Waleed al-Muhairi told Reuters. “Right now, we, like some others, will wait and see.”

With Lehman Brothers filing for bankruptcy on Monday, the crisis has claimed the second major investment bank in the United States after the US government backed a fire sale of Bear Stearns to JPMorgan in March. Sovereign investors have lost billions of dollars they entrusted to Western banks in emergency capital raising exercises earlier this year and last. The Kuwait Investment Authority (KIA), for example, invested $5 billion in January in US banks Merrill Lynch and Citigroup but has come under pressure from deputies of the Gulf Arab state’s parliament because their stocks have taken a hit since then.

In November, ADIA sealed a deal to buy a $7.5 billion stake in US bank giant Citigroup while in September last year, QIA bought a 20% stake in the London Stock Exchange. QIA owns about 2% in Credit Suisse. In a sign of caution, Kuwait’s Finance Minister Mustapha al-Shamali said in July that KIA would boost investments in Asia, with a focus on Japan, China and India, to diversify its assets. (Reuters)