Business news for Thu, 29 Nov 2007 & with words abu+sovereign. 3 news.

CHINA Investment Corp, the nation's US$200-billion sovereign wealth fund, signaled it may invest in stocks rocked by subprime mortgage defaults. "CIC wants to be a stabilizing force in the international capital markets," Chairman Lou Jiwei told a conference in Beijing yesterday. He then cited a "recent example" in which a similar fund invested in a financial institution with subprime losses, without elaborating. Abu Dhabi Investment Authority this week agreed to buy a US$7.5-billion stake in Citigroup Inc, helping the biggest United States bank by assets to bolster capital eroded by credit-market losses. China Investment, which began operations in September, was set up to help improve returns on China's US$1.4 trillion of reserves and to oversee bailouts of the nation's own lenders, Bloomberg News said. "The steady stream of funds' buying of distressed assets tells us there is a buyer of last resort out there," said Robert Rennie, chief currency

Citigroup calls on sovereign wealth. It joins a long line of supplicants CITIGROUP may have lost its bearings and its chief executive, but it has not yet lost its memory. In 1991 a Gulf investor came to the rescue of Citicorp (as it then was), which was strapped for cash as a result of an American property downturn, among other things. Saudi Arabia's Prince Waleed bin Talal, the man in question, largely owes his place on the world's rich-lists to that decision. On November 26th the Abu Dhabi Investment Authority (ADIA), a secretive sovereign-wealth fund, displaced Prince Waleed as the bank's biggest shareholder, paying $7.5 billion for a 4.9% stake. Citi's shares rallied heartily, but it is not out of the woods yet. The boost to the bank's faltering capital ratio from ADIA's investment will offset expected write-downs on subprime-related investments in the fourth quarter. On the other hand, weakening consumer credit in America and uncertainty over its exposure to off-balance-sheet assets will add to the subprime worries. And ADIA has driven a hard bargain: the fund bought convertible securities that will yield a hefty 11% rate of interest until they become shares in 2010 and 2011. ...

Following the Abu Dhabi investment authority taking a stake in Citi, sovereign wealth funds have moved centre stage again. The New York Times reports that the Chinese plan to avoid controversial overseas investment with their $200bn plus fund and instead concentrate on bolstering their own banking system.