NEW YORK - WALL Street banks once looked to state-owned sovereign funds in the Middle East and Asia to shore up their own balance sheets. Now the sovereign funds are suffering huge losses of their own, partly thanks to big overseas bets on the financial sector.

On Tuesday, the Kuwait Investment Authority said the oil-rich country's sovereign fund lost 9 billion dinars (S$46.8 billion) from March to December of last year, while Singapore's Temasek lost around US$39 billion - 31 per cent of its holdings - in the eight months ending November 30.

Temasek invested US$5.9 billion in Merrill Lynch last year, becoming its biggest shareholder. Merrill Lynch was later acquired by Bank of America, and its stock traded then at a fraction of the price it was worth at the time of Temasek's investment.

Temasek also owns significant chunks of Standard Chartered PLC and Barclays PLC.

Earlier this week, Temasek said its chief executive, Ho Ching, would resign and be replaced by former BHP Billiton CEO Charles Goodyear.

The fund fell to $127 billion as of November 30 from $185 billion on Mar 31, a government official told lawmakers.

In January of last year, the Kuwait Investment Authority also invested US$2 billion in Merrill Lynch alongside a Korean state fund, as well as US$3 billion more in Citigroup Inc.

A recent paper by the Council of Foreign Relations estimated that the KIA was worth US$262 billion in Dec 2007 and US$228 billion in Dec 2008.

A Kuwaiti lawmaker, Walid al-Tabtabai, said KIA officials told the Kuwaiti parliament about the losses from the sovereign fund. He said the KIA told lawmakers in a closed session that the investments were long-term, the losses 'justified' and could be regained. The state rarely releases figures about its foreign investments affected by the global financial crisis.

The same Council of Foreign Relations paper said Abu Dhabi, the capital of the oil-rich United Arab Emirates, had state-owned funds worth US$328 billion in Dec 2008, compared to US$453 billion in Dec 2007.

One of the funds, the Abu Dhabi Investment Authority, plowed US$7.5 billion into Citigroup in Nov 2007. Citi's stock is worth about 10 per cent now of what it was then.

The International Monetary Fund in Mar 2008 estimated that the combined value of the various sovereign funds was US$2 trillion to US$3 trillion.

The Middle East funds use the funds to invest their revenues from oil exports, while Asian funds invest extra cash from trade surpluses.

Determining the true value of sovereign funds is difficult because they disclose few details of their holdings. -- AP