Saturday 28 February 2009
Sovereign wealth funds eye move into commodities
Sovereign wealth funds (SWFs) - the investment arms of cash-rich nations - are poised to raise their holdings of commodities and oil in a move that could have a huge impact on financial markets.
Sitting on up to $4 trillion (Dh14.6 trillion) in assets, much of it from selling oil and other raw materials, most SWFs have so far been conservative in their investment choices, holding dollars, treasuries and shares in large US and European companies.
But they have been badly burned by the global financial and economic turmoil over the last 18 months and are now looking at new strategies to protect their interests, analysts say.
Sitting on up to $4 trillion (Dh14.6 trillion) in assets, much of it from selling oil and other raw materials, most SWFs have so far been conservative in their investment choices, holding dollars, treasuries and shares in large US and European companies.
But they have been badly burned by the global financial and economic turmoil over the last 18 months and are now looking at new strategies to protect their interests, analysts say.
Gulf Islamic financial institutions face risk
Gulf Islamic financial institutions and takaful companies are feeling the repercussions of the current global financial market disruption less than most of their conventional counterparts because Sharia law prohibits interest-based financial products, according to a new report by Standard & Poor's Ratings Services.
"IFIs didn't invest in the structured products that have hampered many conventional banks' financial profiles and performance," said Standard & Poor's credit analyst Mohammad Damak in the report, titled Rated Gulf Islamic Financial Institutions And Takaful Companies Have Shown Resilience To Global Market Dislocation, But They Are Not Risk Immune. "And most IFIs should be equipped to weather the financial downturn and keep the effects on their financial profiles at manageable levels.
"We expect takaful and retakaful insurers to continue to resist the toughening market environment. We attribute their resilience to sufficient liquidity flows -- in part due to reportedly higher new business -- to service normal claims levels, and to capital adequacy, which, despite being affected in the current climate, remains supportive of the ratings across the sector.
"IFIs didn't invest in the structured products that have hampered many conventional banks' financial profiles and performance," said Standard & Poor's credit analyst Mohammad Damak in the report, titled Rated Gulf Islamic Financial Institutions And Takaful Companies Have Shown Resilience To Global Market Dislocation, But They Are Not Risk Immune. "And most IFIs should be equipped to weather the financial downturn and keep the effects on their financial profiles at manageable levels.
"We expect takaful and retakaful insurers to continue to resist the toughening market environment. We attribute their resilience to sufficient liquidity flows -- in part due to reportedly higher new business -- to service normal claims levels, and to capital adequacy, which, despite being affected in the current climate, remains supportive of the ratings across the sector.
Saudi banks post 17.3% increase in 2oo8 net profits
Saudi Arabia's local commercial banks posted a 17.3 per cent increase (4.4 billion riyals) in net profit in the last quarter of 2008 while almost all the leading international banks incurred huge losses amid the global financial crisis.
According to the latest report by the Saudi Arabian Monitory Agency (Sama) - the central bank in the Kingdom - banks recorded a net profit of 29.9 billion riyals in the fourth quarter of last year compared with 25.5 billion riyals in the same period of the previous year.
At the same time, they witnessed an 1.1 per cent decline in the average annual growth rate.
According to the latest report by the Saudi Arabian Monitory Agency (Sama) - the central bank in the Kingdom - banks recorded a net profit of 29.9 billion riyals in the fourth quarter of last year compared with 25.5 billion riyals in the same period of the previous year.
At the same time, they witnessed an 1.1 per cent decline in the average annual growth rate.
Citi equity deal 'will not affect Adia'
Citigroup said on Friday that Abu Dhabi’s US$7.5 billion investment in the struggling American bank was unaffected by the latest deal to convert preferred shares into common stock and that Citi would continue making interest payments to the emirate.
Citigroup on Friday announced a deal to shore up its equity by converting preferred shares into common stock. As part of that arrangement, the US government will end up owning as much as 36 per cent of Citigroup, while existing shareholders will see their ownership of the bank diluted.
In the early days of the financial crisis in late 2007, the Abu Dhabi Investment Authority, the emirate’s largest sovereign wealth fund, joined a group of investors coming to Citigroup’s aid, buying a $7.5bn debt instrument. Under the terms of that deal, Adia receives 11 per cent interest per year in quarterly payments, but has to start converting its investment into 235.6 million Citigroup shares in March of 2010.
A spokesman for Citigroup, Steven Cohen, said on Friday that Adia’s investment was unaffected by the latest changes and that its interest payments would continue. He declined to comment, however, on whether the bank was in talks with Adia to alter the terms of its investment. Adia declined to comment.
Citigroup on Friday announced a deal to shore up its equity by converting preferred shares into common stock. As part of that arrangement, the US government will end up owning as much as 36 per cent of Citigroup, while existing shareholders will see their ownership of the bank diluted.
In the early days of the financial crisis in late 2007, the Abu Dhabi Investment Authority, the emirate’s largest sovereign wealth fund, joined a group of investors coming to Citigroup’s aid, buying a $7.5bn debt instrument. Under the terms of that deal, Adia receives 11 per cent interest per year in quarterly payments, but has to start converting its investment into 235.6 million Citigroup shares in March of 2010.
A spokesman for Citigroup, Steven Cohen, said on Friday that Adia’s investment was unaffected by the latest changes and that its interest payments would continue. He declined to comment, however, on whether the bank was in talks with Adia to alter the terms of its investment. Adia declined to comment.