Davos: Kuwait Wealth Fund Warns Of Currency War

The decline of the yen could spark a currency war in southeast Asia, Badr al-Saad, the head of Kuwait’s sovereign wealth fund, said in comments aired on Saturday.

The Chinese economy will grow between 7.7 per cent to 8 per cent over the next two years, far better than developed economies, al-Saad, the managing director of Kuwait Investment Authority (KIA), told pan-Arab network al-Arabiya at the World Economic Forum in Davos, Switzerland.

“The only fear is the decline of the yen. The decline of the yen could trigger a currency war in the countries of southeast Asia, this is the only fear we have at the moment,” he said.

The Japanese currency has weakened to about 90 per dollar from 80 since November on expectations Prime Minister Shinzo Abe will force the central bank to ease monetary policy to combat deflation.

KIA has been seeking to invest more in China and China’s foreign exchange regulator recently increased the amount which the KIA can invest directly in local securities markets to $1 billion.

Saad said that KIA has been investing in private equity funds where the returns are good and is shunning bonds because interest rates are so low.

“We have been investing in private equity funds lately … the returns are good,” he said in rare public comments about the KIA’s investment strategy. He named Texas Pacific Group and CBC as two of the funds the KIA has been investing in.

He said the fund wanted to invest in upcoming infrastructure projects in Europe and the United States.

“We think that these countries need to develop their infrastructure. We think that investments in infrastructure will be big in the next five years,” he said.

The KIA manages two main funds. Its Future Generations Fund invests abroad and had assets under management worth 73.63 billion Kuwaiti dinars at the end of March 2012, according to media reports, or $261 billion at the current exchange rate.

The KIA, which does not officially disclose assets under management, also manages a general reserve fund, which acts as the main treasurer for the government and receives all revenues.