There has been a recent hike in news of sovereign funds from Middle East and Asia infusing capital into major US banks burdened by sub-prime mortgage write downs. Singapore has been relatively frequently mentioned with GIC buying in S$14 billion into UBS and Temasek Holdings to spend S$5 billion into Merrill Lynch. Other sovereign funds includes Abu Dhabi Investment Authority buying into UBS with GIC and the China Investment Corp (CIC) buying into Morgan Stanley.
Capital infusion from these sovereign funds, especially a sensitive topic on middle eastern and asian countries buying into major banks of a super power economy, can contribute to liquid the current credit crunch in the United States but will it be another spark for nationalistic opposition? News of GIC and Abu Dhabi Investment Corp buying into UBS has already sparked voices of concern on unfair trading terms that might disadvantage current shareholders of UBS. While the sub-prime crisis has provided ample opportunities for sovereign funds to buy fundamentally strong US bank stocks on the cheap, the question is whether it is cheap enough and opposition--corollary effects of nationalism. There is still uncertainty on whether the UBS-GIC deal would go through.
On a pure economic note in Singapore, overseas investments amounting to almost S$20 billion by GIC and Temasek Holdings would result in large capital outflow and loss of foreign reserves to the United States (with higher demand for US capital investments). The Singapore dollar would be expected to depreciate even more against the US dollar, ceteris paribus. Time to buy US dollar-dominated assets??
Capital infusion from these sovereign funds, especially a sensitive topic on middle eastern and asian countries buying into major banks of a super power economy, can contribute to liquid the current credit crunch in the United States but will it be another spark for nationalistic opposition? News of GIC and Abu Dhabi Investment Corp buying into UBS has already sparked voices of concern on unfair trading terms that might disadvantage current shareholders of UBS. While the sub-prime crisis has provided ample opportunities for sovereign funds to buy fundamentally strong US bank stocks on the cheap, the question is whether it is cheap enough and opposition--corollary effects of nationalism. There is still uncertainty on whether the UBS-GIC deal would go through.
On a pure economic note in Singapore, overseas investments amounting to almost S$20 billion by GIC and Temasek Holdings would result in large capital outflow and loss of foreign reserves to the United States (with higher demand for US capital investments). The Singapore dollar would be expected to depreciate even more against the US dollar, ceteris paribus. Time to buy US dollar-dominated assets??
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