Kuwait plans $100b sov­er­eign fund

The Pak Banker - - MARKETS/SPORTS -

Kuwait plans a new state-owned fund to man­age as much as $100 bil­lion in lo­cal as­sets with the goal of sell­ing them to pri­vate in­vestors in five to seven years, me­dia re­ported. The new sov­er­eign wealth fund will in­clude lo­cal as­sets man­aged by Kuwait In­vest­ment Au­thor­ity, which has been bur­dened by its do­mes­tic man­date and will fo­cus more on its in­ter­na­tional port­fo­lio, Al-Anba re­ported, cit­ing uniden­ti­fied of­fi­cials. Stakes in lo­cal com­pa­nies, as well as power and wa­ter projects, will be in­cluded in the new fund, it said.

A slump in oil is prompt­ing en­ergy pro­duc­ers across the Middle East to con- sider sav­ings and pro­ject de­lays as they grap­ple with crude's de­scent to near a 12 year low. Saudi Ara­bia's net for­eign as­sets dropped to $640 bil­lion in Oc­to­ber, the low­est level in three years, while Kuwaiti Fi­nance Min­is­ter Anas Al-Saleh has raised the prospect of in­tro­duc­ing in­come, cor­po­rate and sales taxes to com­pen­sate for lost oil rev­enue.

Kuwait's plan to pri­va­tize util­i­ties while re­mov­ing do­mes­tic en­ergy sub­si­dies is in­tended to make its power and wa­ter as­sets more prof­itable for the fund and at­trac­tive to po­ten­tial in­vestors, ac­cord­ing to me­dia.

Saudi Ara­bia is also plan­ning to set up a new sov­er­eign wealth fund to man­age part of its oil for­tune and di­ver­sify its in­vest­ments, Reuters re­ported ear­lier this month. The na­tion is seek­ing pro­pos­als from in­vest­ment banks and con­sul­tants, the news ser­vice re­ported, cit­ing uniden­ti­fied peo­ple fa­mil­iar with the mat­ter. The fund may fo­cus on busi­nesses out­side the en­ergy in­dus­try, such as chem­i­cals and trans­porta­tion, and may be ac­tive within one to two years with an of­fice in New York, Reuters re­ported.

En­ergy-ex­port­ing coun­tries that amassed large fi­nan­cial re­serves over a decade-long oil boom are ex­ac­er­bat­ing a col­lapse in as­set prices by sell­ing off hold­ings to meet their obli­ga­tions, ac­cord­ing to Jef­feries LLC. Such na­tions are also shift­ing in­vest­ment strate­gies with an eye on boost­ing re­turns.

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