SINGAPORE (AFP) — Singapore's multi-billion-dollar investment in Citigroup marks the third time in a month that the city-state has stepped in to help shore up an ailing global financial institution.
The Government of Singapore Investment Corporation (GIC) said Tuesday it would invest 6.88 billion US dollars in the US banking giant, whose finances have been battered by the US housing slump.
The GIC said last month it would pump almost 10 billion dollars into Swiss bank UBS, while state-linked investment firm Temasek Holdings committed to injecting 4.4 billion dollars into US brokerage Merrill Lynch.
"Anybody coming in with liquidity will be very fortunate in buying into these companies at discount," said Ilian Mihov, an economics professor at graduate business school Insead in Singapore.
"They have ample liquidity and they're getting very good terms," he said.
GIC and Temasek are both sovereign wealth funds -- a form of government-created investment vehicle which has emerged as a potent force on global financial markets.
GIC was formed in 1981, managing only a few billion dollars of the city-state's foreign reserves. Today it says it manages "well above" 100 billion dollars, and analysts say the true figure could be 300 billion or more.
Temasek says its net portfolio is now worth more than 100 billion US dollars -- and Citigroup Global Markets in October listed both as among the largest sovereign wealth funds in the world.
With their newfound market muscle, however, such funds have led to concerns over a lack of transparency and national security in recipient countries.
The Organisation for Economic Cooperation and Development said recently that many sovereign wealth funds were "opaque and secretive... (and) at odds with standards applied in global financial markets".
Singapore's founding father Lee Kuan Yew -- now GIC's chairman -- said last week that the city-state's funds posed no threat to the economies of Western nations.
"I do not see a backlash against the Singapore sovereign wealth funds," Lee said. "We are no threat."
The US Congress has so far not reviewed any of the transactions, but some analysts believe the growing roster of foreign governments investing in Wall Street could soon spark congressional hearings.
Along with GIC, the Kuwait Investment Authority sovereign wealth fund, Prince Alwaleed bin Talal bin Abdulaziz of Saudi Arabia and former Citigroup chief executive Sanford Weill are all injecting cash into Citigroup.
Citigroup, America's second-largest financial institution by market worth, unveiled the financial backing as it revealed a fourth-quarter net loss of 9.83 billion dollars and a massive 18 billion dollars in writedowns.
Citigroup needs fresh capital because its losses tied to mortgage investments have ballooned in recent months. It said it had raised 14.5 billion dollars in fresh capital, with the largest chunk coming from GIC.
Citigroup also raised 7.5 billion dollars in capital in late November from the state-run Abu Dhabi Investment Authority of the United Arab Emirates, the world's biggest sovereign wealth fund.
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