Sovereign Wealth Funds Get Skittish
“Only 12 months ago pundits claimed most emerging markets would be immune from the credit crisis engulfing the United States and Europe,” says Investment Director Eric Roseman, “They were dead wrong. The emerging markets have plunged more than 65% from their all-time highs while rich oil producing nations, including the Gulf States, have crashed.”“On Thursday, the region’s first default occurred as Global Investment House, a top Kuwaiti investment bank, defaulted on most of its $3 billion dollar debt obligation. This follows the Kuwaiti government’s rescue of Gulf Bank, the country’s fourth largest bank in November after suffering massive losses tied to bad trades.”Most of the world’s largest Sovereign Wealth Funds are dependent on commodities like oil to keep their coffers growing. And after oil’s precipitous drop and the onset of domestic financial troubles, these SWFs are starting to invest closer to home…“At first, bulging oil surpluses were viewed as a White Knight by troubled Western banks. But now, with oil prices tanking, the region’s SWFs have stopped shopping overseas and have started to repatriate capital, as liquidity grows scarce at home. It’s the same story in Asia where SWFs have halted international investments as domestic capital markets swoon.”
“Nobody is immune from the greatest credit squeeze since the 1930s. Not Russia, not the Gulf States, not China and certainly not India.”Eric continues…“I suspect that hostile or non-Western friendly oil producing nations will begin to warm up to U.S. foreign policy if oil prices remain at these low levels. Venezuela, Bolivia and Russia come to mind as those nations that until recently have embraced a tough tone, calling the shots on local drilling projects and tossing out the Americans and Europeans following government nationalization of energy infrastructure.”
“Only 12 months ago pundits claimed most emerging markets would be immune from the credit crisis engulfing the United States and Europe,” says Investment Director Eric Roseman, “They were dead wrong. The emerging markets have plunged more than 65% from their all-time highs while rich oil producing nations, including the Gulf States, have crashed.”“On Thursday, the region’s first default occurred as Global Investment House, a top Kuwaiti investment bank, defaulted on most of its $3 billion dollar debt obligation. This follows the Kuwaiti government’s rescue of Gulf Bank, the country’s fourth largest bank in November after suffering massive losses tied to bad trades.”Most of the world’s largest Sovereign Wealth Funds are dependent on commodities like oil to keep their coffers growing. And after oil’s precipitous drop and the onset of domestic financial troubles, these SWFs are starting to invest closer to home…“At first, bulging oil surpluses were viewed as a White Knight by troubled Western banks. But now, with oil prices tanking, the region’s SWFs have stopped shopping overseas and have started to repatriate capital, as liquidity grows scarce at home. It’s the same story in Asia where SWFs have halted international investments as domestic capital markets swoon.”
“Nobody is immune from the greatest credit squeeze since the 1930s. Not Russia, not the Gulf States, not China and certainly not India.”Eric continues…“I suspect that hostile or non-Western friendly oil producing nations will begin to warm up to U.S. foreign policy if oil prices remain at these low levels. Venezuela, Bolivia and Russia come to mind as those nations that until recently have embraced a tough tone, calling the shots on local drilling projects and tossing out the Americans and Europeans following government nationalization of energy infrastructure.”
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