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Tue 23 Sep 2008 01:05 PM

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Citigroup stake loses Kuwait $270mn

UPDATE 2: No loss from Merrill Lynch investment, up to $600mn profit from Visa stake, KIA MD says.

Kuwait Investment Authority (KIA) has lost around $270 million from its investment in US bank Citigroup, the sovereign wealth fund's managing director said on Tuesday.

Speaking to Al Arabiya Television, Bader Al-Saad said, however, the KIA has not made a loss from its investment in troubled US investment Merrill Lynch.

The KIA invested $5 billion in January in Merrill Lynch and Citigroup to help recapitalise the banks, which were forced to write down billions of dollar due to the subprime mortgage crisis.

Kuwait has come under pressure from deputies of the Gulf state's parliament because the banks' stocks have taken a hit since then.

Gulf funds have lost billions of dollars investing in Western banks this year and last due to the global financial crisis.

Al-Saad also said has made a profit of $500-$600 million from its investment in credit card giant Visa, which it bought almost $800 million worth of shares of in an initial public offering (IPO) in April.

Al-Saad said the KIA is not responsible for saving foreign banks or economies after Gulf sovereign wealth funds decided not to step in and save any of the latest casualties in the escalating US financial crisis.

Last week US investment bank Lehman Brothers filed for bankruptcy protection, Merrill Lynch agreed to be taken over and insurance giant AIG had to be bailed out by the US Federal Reserve.

"We are not responsible for saving foreign banks... This is the duty of the central banks in these countries. We have social and economic responsibilities towards our own country," Al-Saad told the network.

However, he said the financial crisis did create investment opportunities in the US, Europe and Asia.

"Disasters in the United States, some European countries or Asian countries create investment opportunities in the real-estate sector, the financial industry or other sectors," he said, without being more specific.

Al-Saad also said the KIA plans to invest more than 100 million dinars ($374 million) in Kuwaiti shares with the aim of being a long-term investor.

Kuwaiti shares, along with shares across the Gulf, have taken a pounding in the last week as foreign investors pull money out of the region in the wake of the Lehman collapse.

Arabian Business: why we're going behind a paywall