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Qatar may not be lifeline Europe hoped
It bought into a Greek bank and some German brands but Qatar may be more interested in Asia, after all. And Europe can't turn to Abu Dhabi either.
October 10, 2011 11:13 by Reuters
… like other Gulf states, it is seeking to ensure political stability with a sharp boost in government spending. Qatar has roughly doubled some public sector salaries and pensions this year.
ACQUISITIONS HAVE TO GET CHEAPER
“I think the Qataris would be looking for value, and European banks will have to get cheaper and more desperate before Qatar would jump in,” one Doha-based analyst said.
“It would not be on the scale that would have a massive impact on the crisis. Qatar will hardly be a white knight, but rather take a more opportunistic approach.”
Other Gulf states may be even more cautious, analysts said. The Abu Dhabi Investment Authority has some $600 billion of assets, but Abu Dhabi was required to bail out Dubai during a property market crash two years ago and if the global economy worsens, it may yet need to provide more support.
And Abu Dhabi has been burned in the past. In 2007 it agreed to a $7.5 billion investment in Citigroup Inc but filed an arbitration claim at the end of 2009 accusing the US bank of misrepresentation, after its stock price plunged. Citigroup said it had not acted improperly.
Saudi Arabia also has a huge financial war chest, but its government embarked this year on a $130 billion spending programme on housing and other projects. With global oil prices approaching levels at which its budget surplus could disappear, it may not want to undertake risky new investments abroad.
Another issue for Qatar and other Gulf states is whether European financial investments would serve their long-term, strategic aims. Increasingly, the Gulf is looking to Asia for growth and investment, while investing in energy and technology projects might make more sense than buying into an apparent sunset industry such as Western banking.
“I would expect Qatar and other Gulf SWFs (sovereign wealth funds) to continue to look for solid investments that are available cheaply, but they are not altruistic per se,” Ziemba said.
“They are looking to make financial returns and invest in companies that help extend their supply chain, help Qatar…enter new supply chains and gain access to key technology transfer through partnerships to help build up human capital.
“Moreover, it remains to be seen how comfortable European governments will be with foreign sovereign wealth funds taking on a significant share in banking and corporations.”
The financial market speculation about Qatar’s intentions resembles that over China. Rumours have abounded this year that Beijing will deploy more of its $3.2 trillion in foreign exchange reserves to buy the government debt of Greece and other weak European countries.
But so far, Chinese buying has not prevented a collapse of the bond prices of indebted European states. There is no evidence that China is buying more euro zone bonds than the weighting of the euro in its reserves would indicate, and many of the bonds it does hold are believed to be German and other top-quality credits, not the debt of weak countries. (By Regan Doherty; Editing by Andrew Torchia)
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