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US Remains Prime Destination For GIC Investments -Deputy Chairman

Published Monday, 28th February 2011 10:24 pm - © 2011 Dow Jones

(Adds more comments on growth prospects, background on U.S. economy)

By P.R. Venkat and Gaurav Raghuvanshi


SINGAPORE -(Dow Jones)- The Government Of Singapore Investment Corp., or GIC, will continue to invest in the U.S., Deputy Chairman Tony Tan said, reaffirming the sovereign wealth fund's faith in the recovery of the world's biggest economy.

"The U.S. remains a prime destination for GIC's investments. With the U.S.'s open and receptive attitude to foreign investment, GIC will continue to invest in America," Tan said in a speech in New York Wednesday, a copy of which was made available by his Singapore office Thursday.

Tan said the U.S. economy may grow 4% this year, a substantial improvement over what was expected even two months ago.

The U.S. economy stabilized and recovered modestly in 2010 after contracting in 2009 and posting zero growth in 2008 during the global financial crisis that engulfed the globe.

"Problems and challenges remain both in the short as well as over the longer-term but I believe that America has enduring strengths, which will revitalise the U.S. economy and throw up many opportunities for profitable investments," Tan said.

GIC, with a portfolio valued at more than US$185 billion, made some high-profile investments in the U.S. during the recent financial crisis, including US$6.88 billion in Citigroup Inc. (C) in January 2008.

In September 2009, GIC cut its stake in Citigroup to below 5% after exchanging convertible preferred stock for common stock, making US$1.6 billion profit over the conversion price.

In December 2009, GIC reduced its stake further to 4% after Citigroup's capital-raising exercise in the same month, but the sovereign wealth fund, which manages Singapore's foreign exchange reserves, has maintained that it will continue to invest in Citigroup as it is confident of the U.S. bank's long-term prospects.

U.S. economic growth accelerated in the final three months of 2010 as Americans spent more and businesses drew down inventories, suggesting the recovery is likely to pick up speed this year. Gross domestic product rose at an inflation-adjusted annual rate of 3.2% in the fourth quarter, the Commerce Department said last month.

The improving economic outlook for the U.S. reflects healthier household and financial sector balance sheets which have been repaired over time, as well as strong fiscal and monetary stimulus, Tan said, adding that financial conditions have become more supportive with banks increasingly willing to lend.

However, he said that the outlook for Europe remains mixed with economies such as Germany and those in northern Europe doing well but some countries are likely to face continued contraction.

"The major challenge for the euro zone is to deal with the sovereign debt crisis which has engulfed Greece, Ireland, and could well include Portugal and Spain," Tan said.

He also said that the growth outlook for Asia remains bright though regional economies are grappling with inflation, emerging asset price bubbles, and large capital inflows.

"Economic growth in Asia will remain strong although there is a risk that a strong U.S. recovery could lead to upside surprises resulting in more severe inflation and asset price problems," Tan said.

-By P.R. Venkat, Dow Jones Newswires; +65 64154 152;

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