Following the recent global financial turmoil and the collapse of several US financial institutions, the United States Government is encouraging foreign investments in US companies and institutions. Specifically, funds in the Gulf Cooperation Council countries are aggressively being encouraged to invest in the United States.
According to the Gulf News Agency, Robert Kimmitt, deputy secretary of the US Department of the Treasury, praised sovereign wealth funds (SWFs) such as the Abu Dhabi Investment Authority (ADIA) in sharp contrast to a debate in the West early this year that sought to put protectionist barriers against investments made by these organizations. Kimmitt said the US favors "the free flow of capital, both from sovereign wealth funds and all other overseas investors." He is meeting officials and business leaders in Saudi Arabia, Kuwait, Qatar, Iraq and the UAE, trying to encourage Arab funds to invest in the US.
The economic downturn and the ensuing panic has already created unprecedented investment opportunities in the US both in real estate and in science and technology. Lack of liquidity has caused some assets to be sold at significant discounts to the fundamental values of such assets. In this environment, prudent investors from around the world have started to take a closer look at the US market. As an example, Mohammad Ali Al-Hashimi, the Executive Chairman of Zabeel Investments, recently announced that his company is keen to invest in the US, but not willing to "overpay" for deals.
The question in the mind of many institutions is where the bottom of the market may be. However, for fundamental investors catching the bottom of the market must not be the sole objective. Acquisition of assets that are trading at discounts to intrinsic valuations shall translate into economic gains in the long term. Waiting for the market to bottom out might lead to realization of higher gains on investments but carries the risk of missing the bottom and ending up trying to make investments in a rising market, where quality assets will be harder to come by.
For sovereign wealth funds and other GCC pools of capital, it is prudent to continually evaluate opportunities and to make investments as the markets gradually stabilize. Investments in fundamentally sound and strong companies with proven cash flows and a clear growth path is a great diversification tool for GCC funds and right now the time is great for accessing unprecedented opportunities.
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2 comments:
Very interesting. This is not unlike the situation in emerging markets when the dawn of cellular technology took over the telocumminactions industry. Emerging countries and even rural areas of developed countries advanced more rapidly as they in effect "skipped" over land lines and went directly to cell phones. Together with the naturally occuring situation of moderate inter-city driving and other factors, your post may very well be correct.
Good analogy. and besides, there isn't much choice. As President Obama mentioned today while addressing a reporter at the G20 summit, "if India and China drove as many cars as the US did on a per capita basis, the earth would melt."
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