Dubai Group to invest $ 2.5 bn in India
LONDON - Could India and China get any more popular with investors? It seems they just have. Dubai Group, a government-controlled investment fund, reportedly has said it is investing $2.5 billion into China and India over the next two years, with a focus on large-scale investments in manufacturing, finance and real estate.
Announcements of this kind are notable given the subprime crisis, which while shaking up Western economies is making emerging markets in Asia and the Middle East look increasingly attractive. “Sovereign wealth funds are looking for longer term value and these are increasingly to be found in emerging markets, as long as their economies continue to, by-and-large, steam ahead,” said Jan Randolph, head of sovereign risk at Global Insight.
Many economists are predicting that potential economic damage from the subprime crisis could compel the U.S. Federal Reserve to cut interest rates before the end of the year, a move that would make an already-weak dollar even weaker. All the more reason for sovereign funds to steer clear of American assets, said Randolph, particularly since many already have heavy exposure to dollar holdings and the greenback itself.
On Monday, Prime Minister Lee Hsien Loong of Singapore called on the international community to resist the urge to block investments by sovereign wealth funds. (See: “Singapore’s Lee Urges Openness to Investment”) The Dubai fund was quoted in a published report as saying that that it had spent the last three to four years investigating the investment possibilities of Asia. “We feel right now we’ve done the first stage,” Dubai Group Chief Executive Soud Ba’alawy told the Wall Street Journal on Monday, adding that Dubai would become a more aggressive and “meaningful investor in this region.” Dubai Group could not be reached for comment.
Protectionist sentiment has made some of Dubai recent takeover attempts in the West troublesome: The Congressional backlash to its bid for Peninsular and Oriental Steam Navigation, its offer for the Nordic stock exchange OMX, and New Zealand’s Auckland airport, are a few notable examples.
Dubai’s deals in Asia have yet to reach the multibillion dollar thresholds of those just mentioned, its largest to date being the $225 million purchase of a 40% stake in Malaysia’s Bank Islam. But given the current circumstances, expect to see much bigger deals in the near future.
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