Gulf Responds to Crisis with Patience
When one turns on the news today, there’s a good chance that they will be faced with the image of a well-dressed professional exiting their office carrying a simple cardboard box: a sad sight for sure and even worse for investor confidence. The collapse of the second major U.S. bank in as many weeks has unleashed financial chaos across international markets. However, what is interesting is that while so many funds, institutions, and individuals began to pull out, sovereign wealth groups from the Middle East responded to the crisis by, well, not responding. The Abu Dhabi Investment Authority, one of the region’s highest performers, recently confirmed their intentions to invest in domestic securities to prop up local bourses hit by the international financial crises. Already worn down by international tensions with Iran and an overheated real estate sector, Gulf bourses approached a 17-month low on Monday after the U.S. Federal authorities allowed Lehman Bros. to collapse. Anyone who thought that Middle Eastern capital would come running to the rescue of Lehman was sorely mistaken, as these groups have been stung by such heroic adventures in the past. Chief Operating Officer Waleed al-Muhairi of the Abu Dhabi government-owned Mubadala fund told Reuters that “Mubadala is not looking at any of these financial players that are going through difficulties. There is a good amount of volatility, and it is not the best time to invest. Right now, we, like some others, will wait and see.” Kuwait’s SWF, which happened to have put $5 billion into Merrill Lynch and Citigroup last January, now faces attacks from members of parliament outraged over the loss of public funds in the financial crisis. Similarly, the Abu Dhabi Investment Authority had sank $7.5 billion into Citigroup back in November, but declined to comment on the crisis this week.As international markets beg and fight for the robust liquidity of the Mid-East funds, these acquisitions and major stakes in financial institutions are by no means missions of mercy. ADIA for example plans to take a $280 million foray into Australian commercial real estate as part of an expanding portfolio.Most financial players in the Gulf agree that the current crisis calls for decisive action – and their conclusion, frustrating as it may be for those hoping to avoid falling back to a government bailout – is that it is a decision for someone else.












