Friday, November 30, 2007

Capital flows

The shift of capital control from West to East continues. Earlier this week the Abu Dhabi Investment Authority paid $7.5bn for a 4.9% stake in Citigroup (and Citigroup is paying a staggering 11% for that capital injection). Today Dubai International Capital has appointed the former heads of Sony and BMW and the CEO of Glaxo to help it buy stakes in listed companies. This Dubai fund which is owned by Sheikh Maktoum, has large stakes in HSBC and EADS (the Franco-German aerospace group which owns Airbus). Ping An Insurance, the second largest life assurer in China, is paying $2.7bn for a 4.2% stake in Fortis, the Belgo-Dutch banking and insurance group. Meanwhile the head of China Investment Corp says that he wants to emulate the Arab sovereign wealth funds and is actively looking to take stakes in large Western companies. He hasn't had a great year so far: he paid around $3bn for a pre-IPO stake of nearly 10% in Blackstone, the US private equity firm, which has since fallen by over 40%. Ouch!

4 Comments:

Blogger kinglear said...

I suspect this may have all the trappings of previous invasions of oil money and Japanese money. The Americans in particular love taking other peoples money - then somehow always manage to buy it back at half price. The only truly succesful investment of this nature I can recall ( I'm sure there are lots more) was Gaddafi putting $1b into Fiat. They got out at about $3b, and then used the gain as blood money over Lockerbie.

9:52 am  
Blogger Winchester whisperer said...

A Saudi invested $600m in Citibank in the early 90s and has made 10x his money even with the fall in the share price.

10:01 am  
Blogger Welshcakes Limoncello said...

I don't understand finance but do you think all capital control will end up in the east?

7:09 am  
Blogger Winchester whisperer said...

Hi WL - I think that's unlikely but it is interesting that the Chinese and the Arabs are buying political influence in this way.

8:13 am  

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