Dubai fund buys stake in HSBC

DUBAI, May 1 (Reuters) Dubai International Capital, owned by the ruler of Dubai, said on Tuesday it bought a stake in HSBC Holdings Plc for a fund it manages, making the fund one of the largest investors in Europe's biggest bank.

Dubai International Capital bought the shares over several days last week for its $2 billion Global Strategic Equities Fund, which includes cash raised from the world's largest oil-exporting region, Anand Krishnan, chief operating officer of the private equity firm, told Reuters by telephone.

The firm, owned by Sheikh Mohammed bin Rashid al-Maktoum, set up the fund last year to invest in the world's biggest listed companies. Krishnan said last month the fund was planning acquisitions worth $5 billion over the next year-and-a-half.

The stake in HSBC is ''substantial'', making it ''one of the leading shareholders in the company,'' Dubai International Capital said in a statement on Tuesday, without being more specific. Krishnan declined to give details.

Last month, Krishnan said the fund would typically take stakes of between 2 and 3 percent.

''This is the first of many planned investments that will eventually see the fund investing about $10 billion in global companies,'' Dubai International Capital Chief Executive Sameer al-Ansari said in the company statement.

The fund is at least the second Gulf Arab investor to buy a stake in London-based HSBC. A Saudi Arabian investor, Maan al-Sanea, bought 3.3 billion pounds ($6.61 billion) worth of shares in the bank starting mid-February after problems in HSBC's U.S. mortgage business hit its share price.

The 3.1 percent stake makes Sanea the bank's second-largest shareholder. Under British regulations, owners must disclose any shareholdings greater than 3 percent.

Shares of HSBC plunged to a 16-month low in February on concern over exposure to the troubled U.S. sub-prime mortgage market in the United States. The shares were down 0.59 percent at 1328 GMT. HSBC declined to comment.

''We don't see the sub-prime as an issue,'' Krishnan said.

''The risk on the downside is very, very low,'' he said, when asked about HSBC's stock.

Gulf Arab states have reaped a windfall from oil prices that have tripled since the start of 2002, and peaked at more than $78 a barrel last year.

The governments, companies and individuals of Saudi Arabia, the United Arab Emirates, Kuwait and the three other Gulf Arab oil producers spent almost $67 billion on foreign acquisitions in 2005 and 2006, more than three times as much as during the previous eight years combined, according to data compiled by Dealogic.

Dubai International Capital's first investment was in January 2005 when it bought a $1 billion stake in DaimlerChrysler AG, becoming the Germany-based carmaker's third-biggest shareholder.

The firm sold some of its roughly 20 million shares last month at about 70 percent more than the 32 euros ($43.65) it paid for them.

REUTERS KR RS2024