The IMF estimates that Sovereign Wealth Funds (SWFs) in Asia and the Middle East as well as other regions collectively hold total assets of between US$1.9 to US$2.8 trillion.
Singapore is one of these funds which it invests through Temasek Holdings and the Government of Singapore Investment Corporation (GIC) whose financial resources are sought after by Western firms hit by the global financial crisis.
But SWFs also run into risks from unpredictable instability in the market. Their multibillion injections into Western entities at good bargain prices see their value sharply reduced by deteriorating market conditions. Often these are due to not fault of the SWFs and are beyond their control.
Thus, some SWFs are asking for protection.
Emanating from the last US-China Strategic Economic Dialogue for the Bush Administration, on 6 December 2008 and strained by the increasing depressive effects of the crisis, the US has instituted a rapid approval process of Chinese financial institutions which want to invest in the US.
In return, China has called on the US to ensure the safety of Chinese assets and investments in the US. This was because, up till the first week of December 2008, the US$200 billion Sovereign Wealth Fund (SWF) China Investment Corp (CIC) has lost US$6 billion on stake purchases in Morgan Stanley and Blackstone Group.
In addition, to greater guarantees for their SWF investments, both the US and China pledged an extra US$20 billion to fund trade.
AFP, “Once bitten, twice shy for SWFs: Analysts” dated 10 November 2008 in the Straits Times (Singapore: Straits Times), 2008, p. B18.
Bloomberg, “Chinese banks wooed” dated 6-7 December 2008 in Weekend Today (Singapore: Today), 2008, p. 32.
Han, Bernice, “Sovereign Wealth Funds more cautious on Western investments” dated 10 November 2008 in the Jakarta Post (Indonesia: The Jakarta Post), 2008, p. 14.