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Protectionism may harm fragile economies, say top SWFs

According to Business 24-7, “Protectionist barriers aimed at capital-rich sovereign wealth funds (SWFs) could backfire on the fragile global economy, top executives of major state investment firms warned yesterday. The sovereign funds have the capital needed by affected economies to recover from the global crisis but governments may come under domestic pressure to impose protectionist measures, they said. Tony Tan, Deputy Chairman of the Government of Singapore Investment Corp (GIC), said the biggest danger facing the world economy in coming years is protectionist sentiment, which may be stoked by high unemployment rates. Tan, speaking at a business forum on the sidelines of an Asia-Pacific summit, said protectionism could spread from the trade arena to financial markets.

“This could manifest itself in the form of protectionist measures not only in world trade but also in financial markets and impede the free flow of funds,” he said.

“If nothing else, this could derail the global economic recovery which all of us are hoping for,” said the GIC deputy chairman.

Jin Liqun, from the China Investment Corporation (CIC), also cautioned against barring investments from government-owned funds. “The sovereign wealth funds will be playing a big role in rebalancing the process but we need co-operation from the recipient countries,” said Jin, CIC’s chairman of the board of supervisors.

“There’s nothing we can do if we are barred from doing our jobs in your countries or when hurdles are very high for us to overcome,” he said.

Jin said sovereign funds can play a major role in restructuring economies.

“Countries need a cushion in undertaking major economic restructuring and provisional funding is of course crucial,” he said, adding that the global recovery was not irreversible.

When the global crisis unfolded, SWFs emerged as a source of crucial capital, especially to Western financial firms and banks in dire need of fresh funding. Singapore’s GIC, which manages the city-state’s reserves of more than $100 billion (Dh367bn), was one of the rescuers of US-based Citigroup and Swiss banking giant UBS. Kuwait Investment Authority’s (KIA) Managing Director Bader Al Saad told the forum that SWFs have collectively pumped $90bn into financial institutions in the last few years.

“I think now we are in a new era of engagement,” said Al Saad.

“There is a unique opportunity for the sovereign wealth funds to represent themselves as investors in the world… They are a long-term investor,” he said.

Al Saad also said perceptions that SWFs were a source of destabilisation in financial markets and that investments were driven by political agendas could not be further from the truth.

“Most of their transactions are cash transactions so there is a real economy and it shows that they are responsible investors,” he said.

“They are a source of stability and last but not least, they are strategic investors… On top of that, they never make hostile takeovers.””

read more: Business 24-7

UNICEF and NBIM to Host Meetings on Children’s Human Rights

The United Nations Children’s Fund (UNICEF), a United Nations programme headquartered in New York City, has partnered with Norges Bank Investment Management (NBIM) to facilitate a series of meetings between companies to discuss issues surrounding children’s human rights.

According to the news release, “the network will facilitate dialogue between leading brands and retailers in the garment and footwear industry to strengthen children’s rights.”

NBIM is invested in many listed companies and have invited them to join a network to tackle these issues. Over the next two years, the organizations plan to hold three workshops as well as quarterly meetings surrounding these issues.

“Over time, we hope and expect that the network will contribute to improved market practices among companies and greater respect for children’s rights,” says Carine Smith Ihenacho, Global Head of Ownership Strategies, in a NBIM press release.

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SouthGobi’s CEO Arrested, CIC Struggles with Investment

The China Investment Corporation (CIC) has long struggled with its investments in coal assets, specifically in globally-listed coal miner SouthGobi Resources Ltd, which operates its flagship coal mine in Mongolia. In November 2009, CIC and SouthGobi Resources inked a convertible debenture deal. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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Qatar Central Bank Deals with MSCI

MSCI, a stock index company whose benchmarks influence investor behavior, has tremendous indirect power impacting the stock markets of smaller economies. In 1988, MSCI released its emerging markets index, a now-widely-used benchmark for many institutional investors wanting access to growth markets. China and South Korea make up the majority of the benchmark, but smaller economies such as Poland, Chile and even Qatar make up other pieces of it.

[ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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