BY Naser:
The Kuwait Investment Authority announced that they sold their stake in Citigroup for $4.1 billion. The KIA bought its stake in January of 2008 in the form of preferred stock. They later transferred their holdings into common stock. The stocks were initially purchased for $3 billion, which yields a 36.7% return on the investment. The recovery of worldwide markets in March of 2009, which was headed by financial stocks, allowed for such good returns during a period when the S&P 500 lost almost a quarter of its value.
It is interesting to note that the value of the common share of Citigroup has fallen 85% from $25 to $4 during the period of the KIA investment. It is also noteworthy to add that the Minister of Finance replied to a parliamentary question in September 2009 that the KIA has a long-term view on the Citi investment.
In response to the sale of the Citigroup investment, the Kuwait Minister of Finance Mustafa Al Shimmali announced that the funds generated from the sale would be reinvested in global markets rather than the domestic market as authorized by the KIA mandate. He also added that the Citi sale has been planned for some time, and no plans exist for any more exits from current investments.
Kuwait’s stock exchange has been lagging other regional markets, and the Kuwaiti economy is not expected to recover as fast as other Gulf States. So if the Ministry of Finance and the government are not planning to reinvest the funds generated by the Citi sale domestically, they should invest other funds generated from the budget surpluses to rejuvenate the economy and spend money on developmental project that would yield long-term benefits to Kuwait.
(No Ratings Yet)
Loading ...Tags: abu dhabi, Citi Bank, Citi Sale, Citigroup, KIA, KIA Sells Citi Stake, Kuwait, Kuwait Investment Authority
Great move by the KIA. If only parliament members would applaud such moves instead of only focusing on the loses. The guy (Mr. Al-Saad) is transforming a bureaucratic authority into an agile investment vehicle.
Look at poor Abu Dhabi. Their Citi trade went bad!
[Reply]
I totally agree. But our friends in the parliament only point out the “bad trades” and thrive at accusing people of stealing the country’s wealth.
[Reply]
Is it justified to give all credit for the profit of this investment to the Kuwaities? Was it a matter of coincedence that the US gov. chose to exchange the stocks from preferred to common right before the economic recovery? (in turn helping KW luck out?)
[Reply]
Raad Reply:
December 21st, 2009 at 9:04 am
Well said.
[Reply]
Keynesian Reply:
December 21st, 2009 at 10:10 am
No it isn’t. The government doesn’t tax individuals in Kuwait because of our abundant oil resources. KIA investments aren’t meant to be distributed directly to Kuwaitis because Kuwait isn’t a company, its a country. One day oil will drain or be replaced and or investments will be our only savior. Look back to the Iraqi invasion of Kuwait: our foreign investments played a pivotal role in financing Kuwaitis abroad, the government, THE war bill, and the rebuilding of Kuwait. Money from KIA should be invested in further investments, infrastructure projects, health care, education; not a check to a spoiled Kuwaiti so that he/she could finance their next Porsche.
As for the second point, the reason preferred shares were converted to common shares was an economic one from Citi’s side. You can take write-offs on common equity, not preferred. That is why it was done. I don’t believe the US wanted Kuwait to profit. KIA was smart and obviously lucky.
[Reply]
What I meant by “Is it justified to give all credit for the profit of this investment to the Kuwaities? ” was , Its obvious that Kuwait didnt anticipate this recovery so really its not their smarts that got them the profit but their luck.
But thank you for clarifying that.
[Reply]
[...] Merrill Lynch? In December 2009, the KIA sold its stake in Citigroup for $4.1 billion and made a profit of $1.1 billion. As for its stake in Bank of America, Al Saad said that he still expects the KIA to make a profit [...]
[...] Merrill Lynch? In December 2009, the KIA sold its stake in Citigroup for $4.1 billion and made a profit of $1.1 billion. As for its stake in Bank of America, Al Saad said that he still expects the KIA to make a profit [...]
………..
My spouse and i suppose for now i will settle for bookmarking along with incorporating your own Feed in order to my own Google consideration. We look ahead to new revisions and can share this kind of site along with our Myspace class….