Gulf wealth funds dominate domestic markets

MARKET DOMINATION: Gulf SWFs control around 27% of market capitalisation in the GCC, Markaz said. (Getty Images)

Gulf sovereign wealth funds (SWFs) control around 27% of market capitalisation in the GCC, valued at around $300 billion, Kuwait Financial Centre (Markaz) said in a report on Monday.

Markaz said a total of 36 SWFs hold stakes in 131 GCC-listed companies across the seven stock markets in the region, including the internationally renowned Abu Dhabi Investment Authority (ADIA) and Kuwait Investment Authority (KIA).

The centre said the top 25 SWFs, which include investment vehicles and state-owned firms in sectors such as oil and gas and petrochemicals, account for 90% of the total market capitalisation of publicly listed companies held by wealth funds.

Markaz referred to the bulk of companies held by the top SWFs as the "golden portfolio", which includes market heavyweights such as Saudi Basic Industries Corporation (Sabic) and Saudi Telecom Company (STC) in Saudi Arabia and Emaar Properties and telecom Etisalat in the UAE.

Gulf wealth funds have hit international headlines in recent months after bailing out several high-profile US and European banks, including Citigroup, Merrill Lynch and UBS, in the wake of the subprime mortgage crisis and ensuing credit crunch.

However, there has been very little reported about SWFs domestic investments.

This could change in the near future though, with several SWFs indicating they are turning their attentions to emerging markets in a search for higher returns on their investments and as problems in the US financial sector escalate.

SWFs were ominously absent from the last minute rescue attempt of US investment bank Bear Stearns.

Markaz said Saudi Arabia had a total of five SWFs holding stakes in 27 Saudi companies worth around $108 billion, while the UAE's seven SWFs held stakes in 27 Emirati firms worth around $61 billion.

ADIA, the world's biggest SWF with around $875 billion in assets, has little direct exposure to local stocks, Markaz said, but does have significant indirect investments in companies such as National Bank of Abu Dhabi (NBAD) and Abu Dhabi Commercial Bank (ADCB) through its subsidiary Abu Dhabi Investment Council (ADIC).

In Qatar, Markaz said five SWFs control stakes in nine listed companies worth $29 billion, with state-owned Qatar Petroleum the biggest domestic investor. While in Bahrain, four wealth funds control around $5 billion of the market's capitalisation, it said.

There are 9 SWFs in Oman with investment value of $6 billion, accounting for 23% of total market capitalisation, according to Markaz.

It said Kuwait appeared the least dominated by wealth funds as reflected by their 12% grip in the market. The total investments by SWFs amount to $25 billion, mainly represented by the KIA.

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