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Mon 25 Feb 2008 01:10 AM

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$60bn Qatar fund to shun US banks

But European lenders likely to see $15bn of investments over next two years, says prime minister.

Qatar's prime minister, who heads the country's $60 billion sovereign wealth fund, said he favours investing in European over US lenders because US bank stocks are likely to fall further on subprime-mortgage writedowns.

Qatar, which bought "under" 2% of Credit Suisse, is looking to spend between $10 billion and $15 billion over the next two years on bank stakes to diversify the country's economy from oil and natural gas, Sheikh Hamad bin Jassim Al-Thani said in an interview in Doha, Qatar.

"In the United States, we need to wait a little," Sheikh Hamad said late on Saturday. "We think there are still problems with the banks."

In contrast, Saudi Prince Alwaleed bin Talal and Kuwait last month agreed to invest at least $5 billion in Citigroup and Merrill Lynch as the two US banks scrambled for capital after billions in writedowns.

State-run Kuwait Investment Authority, a sovereign wealth fund with at least $225 billion of assets, said it would invest $3 billion in Citigroup and $2 billion in Merrill. Prince Alwaleed did not say how much he was investing.

"We are active in international markets and in wherever we find a good opportunity ... in property, financial or industrial," Sheikh Hamad said, declining to be more specific.

The Qatar Investment Authority (QIA), whose assets Standard Chartered puts at $60 billion, is considering making an investment in Britain's second-biggest bank, the Royal Bank of Scotland, the Sunday Telegraph newspaper reported, citing people familiar with the QIA's plans.

The newspaper was the first to report Qatar's interest in Credit Suisse, saying in January that the QIA was looking to build a 5% stake in the Swiss lender worth $3 billion.

"Up to now, I think it is under 2% , but, of course, when we reach the legal point where we have to declare, we will do so," Sheikh Hamad said of his Credit Suisse shares.

"We are buying them for the long-term strategic holding and it's not for selling," Sheikh Hamad said, adding he had made no decision yet about whether to buy more.

"We believe in the bank," he said. "We are also buying stakes in other banks and this is to create a basket."

Credit Suisse stock is down 22.5% and Royal Bank of Scotland almost 15% this year. Citigroup, too, has fallen almost 15% this year and Merrill Lynch 1.2%, according to Reuters data.

Qatar, which has a population of about one million and is the richest Arab country per capita, may consider adding to its 15% stake in the London Stock Exchange, Sheikh Hamad said.

"We have a policy which we are studying in stock exchanges ... one of them is the LSE," Sheikh Hamad said. "The main thing for us is what sort of benefit we will get from it ... we are looking at it for the capital markets here."

Asked if he was interested in buying more shares in the LSE, Sheikh Hamad said: "We might look at it, possibly."

Qatar has no immediate plans to buy a stake in Airbus parent EADS, Sheikh Hamad said.

"EADS is a good company but we have not bought a direct stake," he said. "We were looking at it at one stage but the price has dropped, so we are waiting." Sheikh Hamad said in March he was interested in buying as much as 10% of EADS.

The QIA owns 7.5% of French group Lagardere, which owns shares in EADS. Qatar has no plans to sell any of its Lagardere stock, Sheikh Hamad said. (Reuters)

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