February 19, 2008 / 10:45 AM / 12 years ago

UPDATE 1-Korea Investment Corp has extra $10 bln to invest

(Updates with quotes from Singapore’s GIC, details)

By Kevin Lim and Saeed Azhar

SINGAPORE, Feb 19 (Reuters) - Korea Investment Corp (KIC) said on Tuesday it has an extra $10 billion from the government, which it will use in an opportunistic investment strategy, following the path of other Asian sovereign wealth funds.

KIC previously had $20 billion, invested mostly in bonds, but the new $10 billion will be used in a “more opportunistic, alternative investment type of strategy”, Ong said at the IMAS investment conference in Singapore.

KIC is still working on a mandate for the funds with the South Korean finance ministry.

Ong, formerly Prudential International Investments’ global chief investment officer, declined to give sectors or further details of investments the fund would target.

KIC, South Korea’s sovereign wealth fund, said in January that it will buy $2 billion in preferred Merrill Lynch MER.N stock that could be converted into 3 percent of the U.S. investment bank after two years and nine months.

The Korean government plans to increase KIC’s asset size to $50 billion by 2010.

Sovereign wealth funds have sprung into prominence in recent months after high profile purchases by Asian and Middle Eastern funds in U.S. and European financial stocks that have been hit by credit turmoil.

Singapore’s biggest sovereign wealth fund, the Government of Singapore Investment Corp, told the conference that the U.S. may avoid a deeper recession because of rate cuts from the Federal Reserve and fiscal stimulus from the U.S. government.

“We have at least maybe a 60-70 percent chance of avoiding a kind of a deep recession or to fall into a mild one,” said Yeoh Lam Keong, director of economics & strategy at GIC Asset Management Pte Ltd.

The Fed has slashed benchmark interest rate to 3 percent from 5.25. Financial markets anticipate another half-point reduction in March which would take the overnight rate to 2.5 percent.

GIC’s Yeoh said credit markets may have fallen too much and could start to stabilise on signs of economic recovery, with funds returning to take advantage of this “undervaluation”. “The key drivers of the market going forward are really going to be the credit markets and not so much the economic data,” he said.

The economist did not comment about GIC’s investment strategy.

GIC, which manages Singapore’s foreign reserves and operates like a large asset manager, bought $6.88 billion worth of Citigroup (C.N) convertible stock or around a 4 percent stake last month, after injecting nearly $9.75 billion in UBS UBSN.VX to purchase a 9 percent stake. (Additional reporting by Jeffrey Hodgson, editing by Neil Chatterjee)

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