By Stanley Carvalho
Financial turmoil and surging dollar making US assets much more attractive - ADIC CEO.
Abu Dhabi Investment Co. (ADIC) is considering acquiring US assets that are looking attractive due to financial turmoil and the surging dollar, the state-owned group's chief executive told newswire Reuters.
But ADIC, flush with cash from oil revenues, will be cautious about investing in Europe where regulators are not as active as in the United States in containing the crisis, Nazem Al Kudsi said.
"We think US assets are getting very very attractive vis-a-vis other G7 assets," Al Kudsi said in a telephone interview. ADIC has about $2 billion in assets.
"The authorities in the US are taking the toxic assets off balance sheets of banks and transferring them to the government and taxpayers, so we are left with the good stuff and you have to admit that the dollar has absorbed negative news in a short period very well," he said.
ADIC is owned by state-run Abu Dhabi Investment Council.
Abu Dhabi, part of the United Arab Emirates which ranks as the world's fifth largest oil exporter, has been using part of its oil income to diversify its economy and invest abroad.
Abu Dhabi United Group for Development and Investment, headed by a board member of the Abu Dhabi Investment Authority (ADIA), is buying English soccer club Manchester City. In November, ADIA, the world's largest sovereign wealth fund, sealed a deal to buy a $7.5 billion stake in US bank giant Citigroup.
And Abu Dhabi-owned Mubadala Development Co's acquisitions include a 5 percent stake in Italian sports car maker Ferrari.
Al Kudsi said although the US economy and financial sector dominated negative news, problems in Europe were just starting.
"When you take all these factors, a picture is emerging of US assets in a bottoming process and there are opportunities for growth at the right pricing," he said, noting ADIC is looking at US commercial real estate and equities.
"There's attractive stuff," he said.
ADIC is cautious about Europe because traditionally the European Central Bank (ECB) has been fighting inflation and the Fed has focused on avoiding depressions, he said. "In extreme times, both the ECB and the Fed will inject liquidity. But the Fed is more proactive in such extreme cases, and in stabilising the system."
Al-Kudsi said he expected tougher financial market regulation, such as stricter policing of "naked" short selling - or selling stock an investor doesn't own and hasn't borrowed from another institutional investor - as well as moves by the IMF, World Bank and leading sovereign wealth funds to agree on transparency principles and a code of conduct.
Global sovereign wealth funds said in early September they had reached a preliminary agreement on a set of voluntary principles to guide their investment practices and to calm fears about their motives.
The International Working Group of Sovereign Wealth Funds, which consists of 26 of the wealthy state-owned investors, said it would present the guidelines to the International Monetary Fund's policy-setting committee on Oct. 11.
"The right things are happening," he said.
Al-Kudsi said ADIC will continue to look at investing locally and regionally.
"With central banks in the region becoming more vigilant for regulations... this will impact positively as uneconomic projects will be pushed to the sidelines. Only good projects can pass because the euphoria of massive liquidity is [diminishing] ... rapidly," he said. (Reuters)