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Kuwait firm to tap China real estate

Dubai, October 8, 2009

A Kuwaiti investment firm affiliated to the Gulf state's sovereign wealth fund is eyeing stakes in fund and asset managers operating in China and plans to set up a Chinese property fund, a company executive said.

Kuwait China Investment Co (KCIC) Chief Financial Officer Faisal Nawaz said the firm was expecting a return on investment of 15 to 19 per cent, having already invested in private equity funds.

"I think that's very reasonable, because at that stage you can manage the risk very well ... I think there are real investors who are long-term and who are happy with reasonable returns," he said.

Gulf Arab oil exporters, including Kuwait, have amassed large surpluses from an oil price rally between 2002 and 2008, which enabled them to snap up foreign assets to diversify their risk.

"If you look at the number of people moving from (Chinese) rural to urban areas it sets the stage for expansion," Nawaz told Reuters on the sidelines of a property conference in Dubai.

"The interest we have seen is from investors with a diversification point of view," he said. "People are now more keen on Asia."     Kuwait Investment Authority owns 15 percent of KCIC, which was set up in 2005 with a paid-up capital of about $300 million. Al-Ghanim Industries, a family conglomerate, also holds a stake.

China has attracted about $1.25 billion a week in foreign direct investment since it joined the World Trade Organisation in 2001. But Western executives complain some sectors where they have a proven advantage are off limits as Beijing seeks to give local companies a chance to develop their businesses.

Two-prong approach

Nawaz said KCIC would combine buying into firms and setting up funds to facilitate its entry into the property market.

"There are a couple (of firms) on the real estate side which we want to take stakes in -- real estate managers -- hopefully this will pan out at the end of this year.

"You must have the right people on the ground in order to do business in these countries," he said. "Once we have the infrastructure in place then the next step would be to look at specific funds ... diversification so investors don't have to go in just one project but a multitude of projects."

Nawaz said the first property fund worth as much as $300 million would focus on Asian real estate as a whole, including in China, India and ASEAN countries.

KCIC, an asset management firm, was set up to become an investment vehicle in Asia to tap into the emerging market economies' potential growth.

Nawaz said the firm had already backed the Jade China Value Partners, a private equity fund of funds to invest in private equity funds operating in mainland China.

"We launched the first private equity fund-to-fund for China and raised about 100-plus million dollars in the fund ... we should be marketing the second fund hopefully next year."

OPEC-member Kuwait, the world's fourth-largest oil exporter, has been looking at investing in Asia to help diversify its revenue away from reliance on oil.

In September, it said it hoped to secure China's approval in the first quarter of 2010 to build a $9 billion refinery and said in May it was looking to raise its stake in Industrial and Commercial Bank of China (CBC). – Reuters




Tags: China | Kuwait | Property fund | KCIC |

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