Sovereign Wealth Funds to see another boom in 2008
Updated: 2008-01-13 14:21
That was best demonstrated in their role to address the aftermath of the US subprime mortgage crisis which began in mid-2007, said Yuan, noting the SWFs have poured money into those Western companies hard hit by the crisis.
In the past few months, the SWFs have injected $29 billion to help prop up the balance sheets of troubled banks, such as a $10-billion investment in the UBS by the Singapore Investment Corporation, a $7.5-billion investment in Citigroup by the Abu Dhai Authority, a stake of up to $5 billion in Merrill Lynch by Singapore's Temasek and a stake of $5 billion in Morgan Stanley by the newly-founded China Investment Corporation.
Hailing the SWFs as the savior of the financial world, investment bankers have hoped these funds, with permanent capital and deep pockets, will step up to fill the gap in the merger and acquisition activities created by the slowdown in the private equity industry.
Biased by protectionism in some countries
However, the SWFs' development has been biased by investment protectionism and finance protectionism of various kinds in some countries.
China, who set up its first SWF in late September last year, has called for a fair and objective perspective on the SWFs.
The SWFs, as they also are market-oriented, should enjoy the same treatment as the other institutional investors, said Wei Benzhong, deputy director of the State Administration of Foreign Exchange of China, while addressing an economic forum in late December last year.
The Chinese official also said neither such funds from the developing countries nor from the developed countries should be discriminated against in the market.
They should get equal treatment, competing on an even playground. The developed countries and the developing countries should open their markets under the principle of equality and reciprocation to create a win-win situation.
Financial Times' Wolf also rebutted those who regard the SWFs as a threat instead of an investor, saying many SWFs should raise no concerns.
"My broad recommendation, then, is to consider the emergence of these funds as part of the integration of countries that accept a bigger role of the state in markets than Western countries do today," Wolf said.
"It is absurd to take a country's exports of oil and refuse to allow it to buy assets in return," he added.
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