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Citigroup feels Dubai warning fallout

Bob Moon Mar 4, 2008

Citigroup feels Dubai warning fallout

Bob Moon Mar 4, 2008


Tess Vigeland: The Bush administration is still relying heavily on the banking industry to solve the mortgage mess, but by all indications, things are going to get worse before they get better for the banks themselves.

Today, the leader of a Dubai-owned investment firm warned that it’s going to take — as he put it — “a lot more money” to rescue the nation’s largest bank, Citigroup.

We asked Marketplace’s Bob Moon to take a look.

Bob Moon: Shares in Citigroup sank as much as 6 percent on that news, but recovered a bit to close down 4 percent.

Jeff Cane writes for Portfolio. He says it’s clear Middle East investors are packing a lot of influence — enough to move the markets:

Jeff Cane: I think if you look at how investors reacting to what was said in Dubai, driving the shares of Citigroup down sharply, I mean they put a lot of weight. I think they’re being recognized as important, even savvy investors.

Maybe even savvier than they counted on. While billions of dollars have been invested in Citigroup by an Abu Dhabi-based wealth fund, today’s pessimism came from the head of a rival Persian Gulf fund based in Dubai.

Cane finds that curious:

Cane: Dubai International Capital is a significant shareholder in HSBC, the big British bank that, in many ways, is the only real rival to Citigroup, in terms of global reach, in terms of global cachet. He’s making comments about investments by other Persian Gulf funds at the same time that his fund has a stake in a rival.

So while there’s little doubt that Citigroup has big troubles, investors might want to consider the source.

Punk-Ziegel analyst Dick Bove says just because a Middle East fund is flush with cash doesn’t mean they know any more that you or me:

Dick Bove: The belief is that they somehow have inside information concerning Citigroup, which would be inappropriate and illegal and therefore, what he’s saying simply represents just one more opinion.

Analysts who follow Citigroup do say they see even deeper losses in the weeks ahead, but Bove says that really shouldn’t come as a surprise to investors.

In Los Angeles, I’m Bob Moon for Marketplace.

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