July 17, 2008 / 2:39 PM / 9 years ago

WRAPUP 1-Kuwait's KIA to boost Asia exposure, shares, bonds

5 Min Read

(Wraps KIA details, quotes, FT report, background)

By Ulf Laessing and Rania El Gamal

KUWAIT, July 17 (Reuters) - Kuwait's sovereign wealth fund wants to boost investments across asset classes in Asia with a focus on Japan, China and India, while skipping any future agency debt of U.S. mortgage giants Fannie Mae (FMN.N) and Freddie Mac FRE.N, the country's finance minister said.

The Kuwait Investment Authority (KIA), which manages the Gulf Arab state's massive oil generated-assets, is looking at stocks, bonds and real estate in Japan, and all sectors in India and China, Mustapha al-Shamali told reporters.

"China, India and Asia in general are new markets, growing and promising markets for the future, and investment returns are good there," he said, speaking to reporters after meeting his Japanese counterpart to discuss boosting economic ties.

"We were looking purely into financial and investment sectors and many investments went to equities and bonds. Now we are thinking in bigger sectors, maybe we can go to real estate," he said when asked about investments specifically in Japan.

"We are thinking to increase investments in Japan ... The volume of our investments in Japan until now is good ... (but) it should be much more than that," he said, declining to say how much Kuwait has invested so far in Japan.

He also said KIA was considering investments in several sectors in China and India. "All sectors, we are not looking into a specific sector ... all areas are open," he said.

Gulf Arab states and companies, buoyed by record oil prices, spent about $60 billion on foreign assets last year, almost double the previous two years combined.

Dollar Concerns

The Financial Times reported on Thursday that some of the world's largest sovereign wealth funds were seeking to scale back their exposure to the U.S. dollar in a sign of global concern about the currency.

The KIA is considering investing in the financial industry and might consider raising its stakes in U.S. banks Citigroup (C.N) and Merrill Lynch MER.N if a good opportunity came up, KIA Managing Director Bader al-Saad told Reuters last month.

But Shamali said the Gulf Arab state was not looking now at any future agency debt of U.S. mortgage giants Fannie Mae (FMN.N) and Freddie Mac FRE.N.

"No," he said, declining any further comment.

KIA was managing at least 72 billion dinars ($271.4 billion) of assets in the country's Future Generation Fund, a nest egg for when oil runs out, in the year to March 31, Shamali said.

"It is 72 billion dinars. This is the Future Generation Fund ... (KIA) manages this fund and others," Shamali told Reuters, declining to be more specific.

Kuwait invests 10 percent of its surplus, which hit a surplus of 9.32 billion dinars in the last fiscal year, in this fund.

Acquisitions outside of the region by Gulf Arab buyers more than tripled to $89.13 billion in 2007 compared with the year before, according to London-based research firm Dealogic.

The Financial Times said a large sovereign fund in the Gulf had cut its dollar-denominated holdings from more than 80 percent a year ago to less than 60 percent, but gave no source.

The FT also said China's State Administration of Foreign Exchange (SAFE) had been looking to strike deals with private equity firms in Europe as a part of a plan to reduce its U.S. dollar holdings, citing people familiar with the matter.

Such a shift at China's SAFE, controlled by the central bank, would be significant because it manages the bulk of the country's fast-growing foreign currency reserves.

The FT report said SAFE had been holding talks with Europe-based private equity firms about putting billions of dollars into their latest funds, precisely because these funds are not dollar-denominated.

In addition, SAFE is encouraging the private equity firms with which it has relationships to make investments in natural resources companies in markets outside the United States, in part to hedge its exposure to the dollar, said the report.

A SAFE official declined to comment when contacted by Reuters. (Additional reporting Wayne Cole, Kevin Yao and Jacqueline Wong (Reporting by Ulf Laessing and Rania El Gamal; Editing by Andrew Marshall)

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