Some see serious trouble ahead, some see the troubles as to be expected in a rapidly expanding economy, and are notb that serious. http://www.bbc.co.uk/news/business-13802453
And do remember Temasek has big bets on China.
So does GIC.
Some see serious trouble ahead, some see the troubles as to be expected in a rapidly expanding economy, and are notb that serious. http://www.bbc.co.uk/news/business-13802453
And do remember Temasek has big bets on China.
So does GIC.
According to Asymco: “If Apple had no revenues, the current cash would sustain operations (SG&A and R&D) for over 7 years or until the middle of 2018.”
“The funds are big enough to place Apple’s CFO office in the top 100 largest fund managers in the world and larger than any hedge fund manager.” More than Temasek and GIC combined, FYI.
The SGX’s CEO is reported by the FT to have said that the SGX’s planned takeover of ASX is its Plan B. He clarified that Plan A was organic growth by introducing new products. A few months ago he said if the ASX bid failed, SGX ”had other fish to fry”. This implied to people like me that Plan A was the SGX takeover and Plan B was some other takeover.
The fact that he has “clarified” his earlier comments shows that he is panicking. See the previous post for the reason.
A A$7.3 billion ($7.1 billion) bid by the Singapore Exchange (SGXL.SI) to take over its Australian rival is faltering as the Australian government, the regulator and a key opposition party are all set to reject it, the Sydney Morning Herald said. Reuters article
The SMH story is extremely credible was it was written by the paper’s chief political correspondent.
This shows that SGX did not do its homework. Everyone who has a say in approving the bid seems against it. Reminder: the takeover needs the approval of the Foreign Investment Review Board, then the Treasurer (finance minister) and then Parliament (where the governing party does not a majority).
The only people in favour are the ASX board and the shareholders. They would wouldn’t they? The shareholders are being offered a huge premium.
SGX should cut its losses and move on. And sack is FT CEO who, I’ve been assured, is the moving force, behind the deal. It’;s not the first time an FT CEO has messed up SGX. It had a previous FT CEO. But the in-between local-born CEO (now president at Temasek) doesn’t have a gd record too, S-Chips continued to be the primary source of new listings (numberswise) when he was CEO, even though evidence that there were problems with S-Chips was growing.
More than 50% of its profits come from emerging markets juz when emerging markets are losing their attractiveness to global investors.
Given Cit’s record of losing serious money by jumping into markets late (think sub-prime, and lending to finance LBOs, US property (in the 80s) and Latin America (in the 80s too), S,poreans should be concerned., given GIC’s 5%(?) odd stake in Citi,
The Fed notified financial institutions that passed a second round of stress tests that they can begin returning money to their shareholders, The results are confidential but already some US banks are saying they will raise dividends this year. Among them are Citi rivals JPMorgan and Wells Fargo. Citi says that only in 2012, will it consider raising its dividends, It got a lousy rating?
And I now know why the executive director of GIC is looking to increase US exposure. Read the rest of this entry »
I’ve ranted at how Temasek and GIC allowed investment banks to short change them (and us) in two IPOs: the share prices traded way above IPO price on listing,
Well it’s nice to see that the Indonesians screwed the investment banks over the Garuda IPO, the share price falling 20% below IPO price, with the underwriters stuck with abt half of the shares,
Now I’m not saying that our SWFs should play that rough with the investment banks — there will be adverse consequences for Garuda when it tries to raise more money and the Indonesian authorities when they try to sell other companies — but our SWFs should try to keep the premiums to around 5%. It’s hard, but they shld try.
In their new book, “Red Capitalism: The Fragile Financial Foundation of China’s Extraordinary Rise” (John Wiley & Sons), Carl E. Walter and Fraser J.T. Howie paint a troubling portrait of China’s economy and its financial system. Despite the nation’s mind-boggling growth and images of gleaming skyscrapers and luxury cars, the authors say China’s growth model is flawed and fragile, and they warn about substantial risks accumulating in its banking system.
Backgrounder: S’pore Inc has big bets on China
As this article shows, Temasek shld not have been so hasty in selling its stake in BoA, which it got after BoA bot Merrill Lynch where Temasek had a big investment. BOA is doing the things that attracted it to spend US$5.9 bn buying shares in Merill Lynch. Temasek lost US$4.6 bn, it was reported.
Shortly before Temasek sold, MM had said that S’pore Inc’s investments in Citi, UBS, and Merill Lynch had a time-frame of 30 yrs. Temasek held its ML investment for over a yr. GIC still owns shares in Citi (profitable), and UBS (big loss).
Bank of America is headed for its best year advising on mergers and acquisitions in Asia-Pacific since 2005, and arranging initial public offerings since 2007, data compiled by Bloomberg show. The combined companies have generated 30 percent more revenue from traditional investment-banking businesses in the region than they did as separate entities … Read the rest of this entry »
National Pension Service, South Korea’s biggest investor, may set up a private equity fund with the nation’s business groups, including Samsung Group and Hyundai Motor Group, to invest in overseas resource development.
Sorry Korea, S’pore beat you to these type of ventures. GIC and OCBC’s insurance arm (Great Eastern) joined a group led by U.S. private equity firms KKR and TPG Capital in buying Morgan Stanley’s 34.3% stake in top Chinese investment bank CICC.
GIC bought 9% and 5% stake went to Great Eastern. GreatE paid US$144.3m. Post acquisition, GIC, which already had a 7.35% stake in CICC, will become the second-largest shareholder in the Chinese investment bank. Central Huijin Investment Ltd., an investment arm of China’s sovereign-wealth fund, is CICC’s largest shareholder, with a 43.35% stake.
Or write stories defending it.
This story, abt the possibility of the Indon authorities seizing Temasek’s assets there, is nothing to get excited about. Someone wants some money. Remember its Money time!
This blogger is bullish on Indonesian. But he has been around long enough to know that Indonesia’s ideas of good governance (public or private) is not benchmarked to global standards. It is uniquely Javanese.
A few years back, a foreign investor was involved in a dispute with the management of a listco. An EGM was called, and the investor’s resolution won the support of the majority of shareholders in a poll vetted by a major international accounting firm.
The next day, the investor read in the papers that he had lost, and management had won, the vote. When he sought an explanation, he was told, “The counters made a mistake”.
A senior US foreign service officer who was based in Indonesia once told me that Indonesian officials had demanded a bribe from him to process an application even though they knew he was a member of the US embassy there. The embassy raised the issue and were told, “Err misunderstanding brudder”. Still, by the time he left for another posting a few years later, his application was being processed.
So now that Temasek has asked the court if a judgement has been issued, sumeone will say, “You mean you never got it? We posted it months ago. We have sent another copy in the mail.”
BTW, S$13m is “peanuts” as Mrs SM could have put it, but didn’t.
Global Logistics Properties has replied to a hack’s rant on why it should have disclosed GLP’s non-compete agreement with ProLogis in China and Japan in its prospectus. The GIC-linked company, which listed on SGX in October continues to contend that the “existence of the non-competition arrangement between the company and ProLogis is not material, and continues to be non-material to the ongoing business of the company”. The quote is from its reply to BT who first exposed this agreement.
I won’t go into the legal issues involved except to say but I find the reply inconsistent. BTW the links to the reply and rant may go walkabout in a few days’ time.
But what will SGX do? If it does nothing (putting the onus on the central bank: MAS approve prospectus leh), or investigates and then clears GLP, it will fuel Ozzies suspicions of the SGX takeover of ASX for two reasons. Read the rest of this entry »
StanChart shares have fallen 6% since last Thursday when it told the market that costs were rising and wholesale banking revenues weak.
For StanChart, growth is proving costly. The British bank with a strong focus on Asian emerging markets said last Thursday that it had another record year to look forward to, predicting further growth in its pre-tax profit for both the consumer and banking wings of its business. However, such growth comes at a high price, and costs for the bank have been growing faster than it would ordinarily allow.
Its finance director said the bank would try to slow cost growth next year until it draws level with income growth once again.
Reminder: Temasek has 19% of StanChart and the bank is one of its best picks ever.
Sabana Reit needs yr help.
This is the first Shariah-compliant reit listed on the Singapore exchange (SGX), and the world’s largest listed Shariah-compliant reit by total assets. Looks like analysts were wrong to expect Sabana to attract Middle Eastern investors saying there are not many such Shariah-compliant REITs in Asia ( M’sia has three, and this is all it seems). Either they got no money, or there are more attractive investments elsewhere or in more lucrative products.
At yesterday’s closing price of 0.97 its first yr projected yield is now slightly more than the 8.22% at the IPO price of price of 1.05.
But it trades only at a “peanuts” 2 cents above NAV of 0.99 in cash. But the properties to be injected in will only give an NAV of the 0.99.
For the time, being this infidel prefers AIMSAMP industrial reit which trades at a yield of 9.5% and an 18% discount to last published NAV. True gearing is at 35% versus Sabana’s 25%,: but the former has big Aussie insurer AMP as big brother, and the latter can only “borrow” from a limited number of “lenders” and via complicated structures. And I don’t have enough info to make judgements on its big brothers.
BTW looks like Temasek’s Mapletree industrial reit has beaten this Shariah-compliant industrial reit performance-wise in IPO terms. They IPOed within weeks of each other recently.
Moral of the tale for pious folk of any religion: God may rule in heaven but on SGX, investors prefer to invest in a Temasek-linked reit, rather than a religious-compliant reit. The blasphemous (not I) may want to shout, “Harry rules OK” or “In S’pore, God takes advice from MightyMind”.
So said a senior American official, referring to a balls-up* in Afghanistan which showed the failure of British, US and Afghan intelligence.
“We have good growth; we have good plans and that is what we should be going into the election for – to mobilise people to support these plans and support the team which has brought this growth to them,” the PM said a few days ago.
But he forgot that there were two serious security goof-ups which proves twice over that ”Something this stupid … requires teamwork”.
Mas Selamat climbed out of a detention centre, avoided capture despite taking refuge in his brother’s flat, and floated out of S’pore. Now anyone can do the first undetected, but the other two? And what odds all three consecutively? And if he can float out undetected, Pakis can float in, undetected, with explosives and illegal drugs.
And we had the SMRT depot break-in, that went undetected for days Given the threat of terrorism, S’poreans (and the authorities) were surprised that SMRT’s security was so lax. SMRT not an ordinary commercial company, it is also a GLC and TLC.
And then there were the PR damage limitation exercises that resulted from these incidents. They were so inept proving that ”Something this stupid … requires teamwork” comes. We had the CEO of SMRT (an FT from M’sia) blaming the public, and MPs being told by the Home Affairs minister that that Mas Selamat could go undetected in the flat “was not a security lapse’ and that hundreds were probed. What weed were they smoking? Or drug they were taking? Or what alcohol were they drinkng? Or what combination of these? Read the rest of this entry »
Did you know that when the government sells state land to property developers, the money flows into the reserves (which are managed by our SWFs) and not into the Consolidated Fund like other government income? This is uniquely S’porean. Other countries credit land sales to income. The government’s rationale is that as state land is an asset, sale proceeds should not be credited to income but to capital (reserves). Makes sense, but that’s not how other governments account for land sales: even HK, and no-one can say that HK is badly run or profligate.
So when HDB “buys” land from the government it is adding to the reserves. As it and government claim that the price an apartment is sold does not reflect this price, they claim HDB makes a loss. But whatever it is (I leave it to others to dispute this claim), the reserves are increased.
So in addition to the surpluses (generated by thriftiness or meanness according to who is talking) and (indirectly via a circuitous route) our CPF monies http://atans1.wordpress.com/2010/11/02/how-we-fund-our-swfs/, sales of state land also contribute to the reserves that GIC, Temasek and the central bank manage.
There was one financial year ending March 2008 ( I think), where the government injected abt S$10 billion into Temasek. This sum was more or less equal to the amount that the government took in property sales for that year. Easy come, easy go as in the following yr Temasek could have lost as much as US$4.6bn (in 2009 March this would have been S$7bn) on Merrill Lynch. And there was the much smaller loss on Barclays (800m sterling?, then worth abt 1.7bn S$). Err not much change left over from injection: only S$1.3bn, “peanuts” as Mrs GCT might have put it, except she didn’t.
So this combination of surpluses, CPF money (indirectly via a circuitous route), and state land sale proceeds, have resulted in our SWFs having 179.5% more in assets than S’pore’s 2009 estimated GDP.
The Norwegian’s much larger fund (US$471bn) is only 23% more than Norway’s GDP. Abu Dhabi’s fund (at US$627bn) is 627% of its GDP. For those interested, I used FT’s US$248bn for GIC and US$133bn for Temasek. As to GDP numbers, I used CIA Fact Book as reference. (BTW, I’ve not taken into account the amt of foreign reserves that MAS manages because I could be double counting if I do. For the record, MAS says its reserves as at end 2009 are US$188bn).
So we got plenty of $ to make housing more affordable*. And there is no need to change constitution, or cut other expenditure. Juz change the accounting rules on land sales.
BTW, I am working with an illustrator so that it is easier to visualise the connections between CPF, surpluses, Consolidated Fund etc http://atans1.wordpress.com/2010/11/02/how-we-fund-our-swfs/ . Hope to post something one of these days. [Update on 4 December, the cartoon]
*Even after taking away our public debts; 8th in the world at 113.10% of GDP. [Update at 10.30 am]
This piece is an attempt* to answer,”If Singaporeans are not “hard-driving and hard-striving”, where did GIC and Temasek get so much money to lose?”: a posting on a Temasek Review article in late 2009.
The answer parroted mindlessly by the government is that government budget surpluses mean that GIC and Temasek get money to invest with.
A more detailed explanation has to start with how the surpluses arise.
As about 43% of the working population don’t pay income tax, and VAT and other taxes are relatively low: one way the surpluses are generated is by a government being thrifty (government’s view) or mean (view of many netizens).
Economists in the private sector, and the Reform Party (the sec-gen was once an economist and he has a first-class degree from Cambridge) have argued that rather than accumulate large surpluses that are then invested abroad, the government should spend more building up Singapore’s human capital. By spending more on things like education, healthcare and consumer protection, the returns generated will be better than the returns on overseas investments.
This is an argument that has excellent academic credentials. China is often asked by eminent economists ,”Why do you export so much when you, in return, use the surplus lend to the Americans so that they can buy more from you?” The economists advise that China should invest more locally.
The government’s view is that Singapore needs the reserves as an emergency fund should things go badly wrong. The late Dr Goh Keng Swee talked of spending the reserves in a recession (as has happened recently). Dr Goh and others could also have quoted the example of Kuwait. When Kuwait was invaded by Iraq, the reserves were used to help pay for the war. And afterwards for the reconstruction of the country. They could also have cited Iceland and Dubai as countries that got into trouble because they ran out of $, when they could not borrow any more.
The second reason why surpluses occur is that our CPF monies are invested in special government bonds. The $ from the bonds flow into the government’s Consolidated Fund together with revenues from taxes etc. All government expenses are paid out from this fund. If there is a surplus (as there usually because the government is thrifty or mean depending on who is doing the talking) part of that surplus can go to GIC and Temasek. The government argues that because all the monies in the fund is fungible (cannot be separated), one is wrong to argue that CPF monies are invested abroad.
Technically and legally the government is correct, but so what is the retort? The financial effect (though not the legal consequences) is the same as if our CPF monies are directly invested abroad.
And these special bonds are the reason why S’pore is up there on a list that the local media does not ever publicise. S’pore has the 8th highest public debt to GDP ration (113.10%) in the world. Greece is 7th with 113.40. Other countries on the list above us are Zimbabwe (champion), Japan (second), Lebanon and Italy. Iceland is 9th (106.7) while Ireland is at 36 (57.7).
(Aside, could this high debt to GDP ratio be the reason why the govmin wants to force-feed GDP growth through immigration? I may explore this issue in future and I hope RP will explore the issue as something the electorate should be educated upon.)
Singapore is unique among the countries with the largest sovereign wealth funds. The other SWFs are effectively funded from oil revenues. In the case of Singapore, it could be reasonably argued, by government critics, that the funding results from the “hard-driving and hard-striving” Singaporeans who are forced to save and lend the money to the government; and from less than optimal government spending.
So the quote at the beginning of this piece has elements of the truth. And worse: one could reasonably argue that the government makes something for itself from “hard-driving and hard-striving” S’poreans. One noted local economist has said that the government is effectively pocketing the difference between the returns it gets from investing abroad and the returns it pays on our CPF accounts: a carry trade arbitrage. Borrow low and invest for higher returns.
*What with an election coming, I tot I should revise (and repost) a piece I did in December last year. The revision has been pretty extensive.
Mapletree Industrial Trust was up 25% from its issue price on its first day of trading while GLP (Global Logistic Properties) was up 11% on the first day of trading last monday.
For MIT, this meant that Temasek could have gotten S$300m more and GIC S$385m more for the GLP shares it sold. Not peanuts.
What this means is that the IPOs were priced badly. Ideally an IPO should open at a modest premium from the issue price. 5% would be fair.The investors make a modest profit, while the issuers get a gd price. So my S$685 is an exaggeration, the loss should be S$651m.
Now investment banks will always try to underprice issues because they want happy investors and don’t want to be stuck with unsold shares. Usually they get away with underpricing because issuers don’t know the intricacies of corporate finance. But Temasek and GIC are full of financial whiz-kids, or sure so we are assured.
But then maybe they gave away such a big discount because the money wasn’t theirs?
“It wasn’t that hard for me, just so you know. I made the decision to use your money to prevent the collapse from happening.”
– President George W. Bush, speaking at the University of Texas at Tyler on Tuesday night, via the On the Money blog of The Hill.
If Siew Kum Hong had been been an NMP, I’m sure a parly question would have been asked. But the people-in-blue, “My wife is entitled to my seat” man and the NMPS are likely to remain silent. Our only hope is for one of the whites to ask the question.
Once upon a time, India deemed GIC and Temasek to be one entity and there was a 10% on the joint holdings of both in Indian companies. The Comprehensive Economic Co-operation Agreement (CECA) which was signed in 2005 provided that Temasek and GIC were to be recognised as separate entities, i.e. each is entitled to each own up to a 10% stake in a company.
There is a report in an Indian newspaper that the Securities and Exchange Board of India (SEBI) has ordered that both Temasek and GIC could only own up to a combined 15% stake in a company, or takeover rules would be triggered.
Can you blame one MM for once being sceptical abt investing in India?
(Updated on 13 October)
No not Temasek as predator. Remember it has 18% of StanChart.
But what abt JP Morgan? Top FT reporter Francesco Guerrera analyses
The international conundrum is more complex. JPMorgan earns some 75 per cent of its revenues in the US, a slow-growing, developed country. By contrast, Citi derives some 40 per cent of its revenues from Latin America and Asia, emerging economies with a bright future that are also HSBC’s stomping ground.
Those lenders’ competitive advantage is their ability to offer boring-but-lucrative commercial banking and cash management services to thousands of companies.
JPMorgan has a deep commercial banking network in the US – its most profitable business – but lags overseas.
The bank already works with more than 2,000 foreign companies but Mr Dimon would love to get that number to nearer 4,000 and do more with each of them.
To this end, JPMorgan is adding 250 bankers and $50bn in extra lending to lure foreign companies. But that could take decades and the bank might want to shorten the wait with bolt-on acquisitions (as its investment bank did with Britain’s Cazenove and RBS Sempra).
The recent moves by Heidi Miller, a veteran executive, to lead the international effort, and Doug Braunstein, a takeover specialist, to the role of finance chief, certainly point in that direction.
But, as my GPS intones when I get lost, “there is a better way” – in theory at least – and it leads to Standard Chartered.
A well-run, commercial and retail bank with strongholds in Asia, Latin America and Africa, StanChart could be the answer to Mr Dimon’s problems.
It would not come cheap – its valuation is well above JPMorgan’s – and a bid by Mr Dimon would trigger a war with HSBC and China’s ICBC, among others.
But JPMorgan’s good health affords its chief the luxury of time.
On 12 October 2010, StanChart was up 2% on rumours that JP Chase would bid.
STATS ChipPAC, a chip-tester, recently raised US$600m. As STATS is undergoing a recapitalisation exercise, this means the $ will go to shareholders. Temasek has 81% of STATS.
Glad to see that that Temasek is using a private equity “trick” to enhance its returns. Borrowing money and using the loan proceeds to return $ to shareholders. Every little bit helps post the losses on Shin, ABC Learning, Merrill Lynch and Barclays.
Maybe Straits Trading should try this “trick” as a way to reduce the the loans that Tecity is alleged to have taken out to fund its controlling stake in ST. It owns over 70% of ST and ST has lots of solid assets that would provide gd security for the loans.
But borrowers have to be careful. It’s OK if the borrower’s controlling shareholder is a SWF but not if is juz a family company. Cash flow projections may be wrong, or bonds may mature at the wrong time.
Is Standard Charterd (which like HSBC) had a good crisis taking on too much risk? We shld care as Temasek owns 18% of StanChart, and StanChart is one of its best performing investments.
Ranked 14th among merger advisers in India in 2009, StanChart is now number two (and could be soon Numo Uno) by financing takeovers in the world’s second-fastest growing major market for M&A deals, Bloomberg reports.
The problem is that in the 1980s and 1990s, major US investment banks and European universal banks got into serious trouble by financing takeovers in the US. The deals went sour when the economy collapsed. The banks had tot financing takeovers was a gd way (“no brainer”) of getting into the lucrative M&A game. They forgot that these loans are margin financing by another name.
Is StanChart repeating the same mistake? Maybe it thinks India’s economy may never collapse. But never take for granted anything about a country that needs “divine help” to get ready for the October Commonwealth Games.
Some analysts and accounting experts (among the latter Lynn Turner), a former chief accountant at the Securities and Exchange Commission, say Citi must set aside funds to cover US$50bn of deferred taxes.
These assets are important to Citi. At the end of the second quarter, deferred tax assets made up more than a third of Citi’s tangible equity. So if he had to set aside funds, this would reduce its capitalratios and weaken its balance sheet.
To avoid setting aside funds, Citi has to be confident it will earn US$99bn in taxable income during the next two decades. It says it can.
However as its pre-tax losses in 2008 and 2009 topped US$60bn, these critics ask why it should be trusted. They have a point, while between 2002-2006 period Citi had annual pre-tax profits of at least US$20bn, this got wiped out by the recent losses.
Err so will this “30-yr” investment be around in 30 yrs time, let alone make money for GIC, as MM predicted? Remember Temasek cut loss on its Merrill Lynch investment, after doubling down, and juz before market turned.
Of the 90 publicly listed Chinese property developers listed on the Shanghai and Shenzhen stock exchanges, almost two-thirds of them reported negative operating cash flows for the first half of 2010.
This makes clear why the Chinese authorities had earlier asked the banks to use a 60% haircut in estimating residential property losses.http://atans1.wordpress.com/2010/08/11/temasek-what-abt-these-chinese-property-charts/
Looks like trouble for the Chinese property developers and banks may be coming sooner than later, and for China bank bull Temasek. A repeat of Merrill Lynch and Barclays?
Remember Temasek owns 4% of Bank of China; and 6% of China Construction Bank. And StanChart is a cornerstone investor in Agricultural Bank of China with abt 1% paying US$500m for this privilege). Temasek owns 18% of StanChart.
And what about CapLand and KepLand, with their biggish exposure to Chinese residential properties?
Might sound dumb to ask given that the Chinese banks that Temasek invests in are some of the largest in the world, and given that China’s economy is growing like the bean stalk in the story Jack and the Bean Stalk. But then Shin, Merrill Lynch and ABC Learning were “no brainers”.
State agency Central Huijin Investments did something strange recently. It has controlling stakes in nearly all of China’s largest banks, including China Construction Bank (6% owned by Temasek), Agricultural Bank of China (StanChart is a cornerstone investor with abt 1% paying US$500m for this privilege) and Bank of China (4% by Temasek) . Temasek owns 18% of StanChart.
Huijin just raised Rmb40bn (US$5.9bn) as part of a Rmb187.5bn fund raisng. The aim of raising the Rmb187.5bn is to recapitalise Chinese banks it controlled.
Sounds prudent given the explosive loan growth rates of the banks brought about by Chinese attempts to stimulate the economy.
But this is the weird bit: the state-controlled banks were estimated to have bought more than 80% of Huijin’s first bond issue, on orders from their shareholder. If this is repeated, this means the Chinese banks are lending money to their controlling shareholder so that the shareholder can buy shares in them. No new cash is invested by the controlling shareholder.
Sounds something that only Wall Street cowboys would dream of doing.
Except that the Wall Street cowboys would be in jail for pulling off this stunt, unless of course, if a Texan is president.
Courtesy of this blog. And look at the money supply charts too.
No wonder China’s banking regulator told lenders last month to conduct a new round of stress tests to gauge the impact of residential property prices falling as much as 6o% in the hardest-hit markets. Banks were instructed to include worst-case scenarios of prices dropping 50- 60% in cities where they have risen excessively. Previous stress tests carried out in the past year assumed home-price declines of as much as 30%.
Expectations seem to be for a sharp decline in Chinese property prices over the next two years, with some, and perhaps significant, impact on Chinese banks.
Some time back it was reported that Temasek had emerged as one of the top 10 acquirers in the Greater China region,
after doing six deals worth US$1.47 billion since 2005. According to a market M&A report commissioned by Deloitte, Temasek is ranked No 9 – after Morgan Stanley and Goldman Sachs, which are No 7 and No 8 respectively. The report Read the rest of this entry »
The central bank has given DBS Bank an unprecedented public censure and instructed the 27%-owned Temasek bank to put aside S$230m to cover its operational risks. Gd for MAS, and SM Goh (chairman of MAS), Tharman and Hng Kiang. The last two ministers also sit on MAS’ board.
There is another thing to be put right, SM, Tharman and Hng Kiang.
DBS’ Hong Kong unit recently agreed to pay out HK$651 million or about S$115 million to some clients who bought products linked to Lehman Brothers. As HK$1.3 billion of notes were sold, the compensation received works out to 49% of amount invested.
In S’pore, it sold a similar product, HN5 Notes. DBS issued, arranged and distributed HN5. A total of S$103.7 million worth of HN5 were sold to 1,083 retail clients between 30 March and 30 April 2007, according to a July 2009 MAS report.
The same report said DBS compensated investors S$7.8 million.
What this works out to is 7.5% of amount investments versus 49% in HK. Is this fair? Product is the same.
Force DBS to treat the S’porean investors fairly, ministers. You have the moral authority.
If you do, I’m sure the compensated HN5 investors, family and friends will remember the good deed when the GE comes. It’s “win, win” except for DBS. And even then its a peanutty S$51m, 44% of amount paid to the HongKies.
BTW I did not buy any of the credit-linked notes that failed. Not that “greedy”.
Cabinet minister and NTUC’s Secretary General Lim Swee Say is confident that Singapore will be able to replenish the S$4.5 billion drawn from the reserves over two to three years. He said Singapore makes sure that every dollar is put to good use and every extra dollar is put back into the reserves.
So is he saying the realised losses on Merrill Lynch (may have totalled US $4.6 billion) and Barclays (possibly 800 million pounds) were a good use of the reserves? BTW they total S$8bn at today’s rates. Almost more than double the amounts drawn down for WorkFare.
More to the point, how long will Temasek need to make up for the losses on just these two stocks? Remember its profits have fallen two years running.
Chinese banks may struggle to recoup about 23% of the Rmb7,700bn (US$1,100bn) they’ve lent to finance local government infrastructure projects . reports Bloomberg quoting “a person with knowledge of data collected by the nation’s regulator”.
The estimate implies US$261bn of debt will go bad, almost five times the US$53.5bn the nation’s five largest banks are raising to replenish capital. Remember Temasek owns 4% of Bank of China and 6% of China Construction Bank, both of which have raised more capital from shareholders. And 18% -owned StanChart invested $500 million in Agricultural Bank of China’s recent IPO.
If the estimate proves even a bit correct, Temasek will be having to invest more in the next few years to avoid dilution.
Taz at least to Exxon’s CEO talking of Exxon’s investment in XTO Energy.
And Exxon, the oil & gas major usually gets these things right. Remember it takes up to 30 years to develop a major oil or gas field.
Temasek doesn’t have such a long-term horizon. Remember its “long-term” investment in Merrill Lynch?Lasted slightly more than a yr, and it cut loss, juz as the market was turning, and top hedgies were buying into BoA (buyer of ML). Read the rest of this entry »
In my last post, I speculated that Temasek raised sterling bonds because it might want to buy an oil minor. Read the rest of this entry »
Temasek, which had previously issued bonds only in US and Singapore dollars, sold £200m of 12-year bonds and a further £500m of 30-year debt. The 30-year bonds were popular with British pension funds because there is a shortage of long-term UK debt.
The 12-year bonds were priced at 95 basis points above UK government bonds, while the 30-year paper yielded an extra 90bp over gilts.
Temasek declined to comment on the rationale for the sale, the wires and FT quoted people close to the deal saying it was a move t obtain relatively cheap long-term funding, diversify its investor base and borrowing profile.
There has been speculation that Temasek would invest in BP. The fundraising was not linked to any new investments in the UK, according to people familiar with the matter, the wires and FT reported.
But could Temasek be interested in a small London listed oil & gas company? It is interested in the energy sector. Read the rest of this entry »
Representatives of large US corporations, including General Electric, Johnson and Johnson and JPMorgan visited Cambodia to discuss the potential for future investment.
Few mths back, I heard Temasek is sniffing around too.
Note there is no stock market here yet. One was supposed to start last year.
Gd balanced coverage, here and http://www.temasekreview.com/2010/07/08/temasek-holding-another-unintentional-omission-by-straits-times/ And here [Update on 8 July]
But disappointed that no-one pointed out that the difference in the previous portfolio high in FY2008 and the latest high FY2010 is a measily o.5%. And this when net profit is down 2 yrs in a row, which again, no-one pointed out: FY2009′s profit was only 33% of that of FY2008 (S$6bn v S$18bn) and there was another 26% fall between 2009 and 2010.
Jeffrey Immelt, General Electric’s chief executive, has launched a rare broadside against the Chinese government, which he accused of being increasingly hostile to foreign multinationals.
He warned that the world’s largest manufacturing company was exploring better prospects elsewhere in resource-rich countries, which did not want to be “colonised” by Chinese investors. “I really worry about China,” Mr Immelt told an audience of top Italian executives in Rome, accusing the Chinese government of becoming increasingly protectionist. “I am not sure that in the end they want any of us to win, or any of us to be successful.” Mr Immelt acknowledged the importance of the Chinese market, which contributed $5.3bn to the group’s revenues last year – FT.
But US$5.3 bn is a peanutty 3% of 2009 revenues, and China will always need natural resources, so his plan to do without China is credible, unlike Google’s*.
Hmm maybe, China-fixated Temasek and its TLCs can learn from this? In their case, diversify away from China without losing the opportunity cost of not investing direct in China. Get what I mean?
Temasek Gp are big in China
Mentality of China bulls
*But Google has a cunning plan to use Android to soften losses on search in China. Never count Google out.
Norges Bank governor Svein Gjedremwas in Singapore to open an office of the central bank unit that runs the Norwegian SWF. It is the fourth office outside Oslo after London, New York and Shanghai. It will have 10 staff in Singapore to manage a portfolio of about US$1.5 billion in assets.
He said in a lecture at the Singapore Management Universit he was looking for an opportunity to work with one of Singapore’s two sovereign funds, the Government Investment Corp of Singapore, to develop investment strategies for Singapore and elsewhere, according to BT.
Hmm, is Temasek too cowboyish for him? GIC came out ahead on its Citi investment,and while UBS is still an investment that lost value, UBS is still around, unlike Merrill Lynch where Temasek doubled down its bet. and Temasek cut its losses on Barclays, and BoA (the buyer of ML), just before markets turned?
Norway’s SWF’s performance http://atans1.wordpress.com/2010/04/30/our-swfs-what-our-mps-are-not-asking-ii/
We’ve analysed that Temasek ignored MM’s warning against extractive industries (OK “mining” to be precise) when it went into shale gas http://atans1.wordpress.com/2010/05/21/temasek-ignoring-mm-iii/
The news sometime back that Shell is paying US$4.7bn for a shale gas firm confirms that Temasek and other SWFs are correct. Err except that the seller, private equity firm KKR, is reported to have paid US$350m juz 11 mths ago for a “significant minority interest”. KKR invested via debt convertible into equity.
So jury is out on whether Shell, Temasek, etc. are bubble blowers and buyers.
One wishes Temasek were ahead of the curve (StanChart, Indonesian telcos, Asian banks) instead of being in the middle (hopefully — like the Chinese banks*) or at the back (Merrill Lynch, Barclays, ABC Learning, Shin: anything else?)
There are reports that Temasek will be a keystone investor in the AgriBank of China. If true this will be the third major investment in a Chinese bank. The other two have been good investments.
Islamic finance is set to play a bigger and more central role in global finance. This is because of greater awareness and adoption in more financial centres.
Trade and Industry Minister Lim Hng Kiang said this at the launch of the inaugural World Islamic Banking Conference Asia Summit in Singapore on Monday.
So why is DBS cutting back on the activities of its Islamic banking activities?
Temasek should sort out the “FT is best policy” that dominates the thinking at DBS. It is on its 6th FT CEO in a row. It’s costing Temasek (and ultimately us) shareholder value.
Remember it was an FT that overpaid for Dao Heng Bank, and messed up the takeover of OUB. And the loss in market share in retail banking, so much so that the ex-CEO of PosBank has been brought back as adviser.
Other cock ups
Much more than Korea certainly. The minister of finance said that the success of S’pore is due to S’poreans’ efforts. More to the point the $ in our reserves are due to the recycled savings of Singaporeans http://atans1.wordpress.com/2009/12/26/where-gic-and-temasek-gets-their/
“Korea’s total foreign exchange reserves are about $280bn so it is only putting about 10 per cent into KIC*,” says Mr Kalb**. “Compare that with Singapore where the central bank keeps $150bn in liquid reserves and yet [of the country’s two SWFs] GIC is tasked with managing $250bn and Temasek $100bn.” $ = US$
*Korea Investment Corporation: (Korea’s SWF)
** KIC’s CIO
Some state pension plans have not adjusted their risk premium either since the financial crisis. They expect their equity portfolios to earn them more than 8% per year, a risk premium a bit larger than 5%. The state plans also have no incentive to lower their equity premium. If they do, their projected assets will fall and liabilities will rise. This means their funding ratios will plummet and they will have to start making larger contributions to the plan, which would likely mean higher taxes.
(Taken from link in previous post)
Our MPs should be asking if Temasek’s and GIC have adjusted their risk premiums. Remember the constitution has been changed to allow more of the returns from reserves to be used. Somehow I feel the people-in-blue will be the men-in -white clones on this issue. And our NMPs will not take up the slack. Miss Siew Kum Hong. Feminists and GLBT, you people shouldn’t have made him yr poster boy. As for PAP MPs, what would you do to a dog that bites the hand that feed him or her unprovoked? Yes shoot the dog.
It’s labour unrest . Add another entry to the list of worries for the global economy and financial markets: labor unrest in China – NYT
I sure hope Temasek andits TLCs who have big bets in China have taken this into account. Remember, we don’t do”labour unrest” here.
Err time for Lim Say Swee to lecture the Chinese leaders on what they can learn from MM Lee and him on how to keep the workers docile?
Temasek last week annced a new president and portfolio team head. We shld be glad that Temasek did not succumb to its flagship bank’s “FTs are best whether they perform or not”.
But let’s get serious. Let’s use this annc of personnel changes to reflect on why the departure of one Goodyear Chips could affect us.
Many moons ago (February I think) BT carried an article that backhandedly criticised Chip Goodyear saying that despite his sudden, unexplained departure from Temasek, he is still in demand from the corporate worl. (Can you see the spin for Temasek in this SPH publication, whose chairman is executive director of GIC?)
And well he should be in demand.
When he was hired to be CFO of Melbourne-based miner BHP in 1999, the “Big Australian” had lost its way. In the 1990s, it made a series of ill-conceived acquisitions and failed projects (err sounds like you-know whom’s recent record of Shin, Merrill Lynch, ABC Learning and Barclays), amid historically low commodity prices.
The then former investment banker (he was a CFO at another miner) was one half of an all-American dynamic duo (Sorry, I’m a Batman fan). The other was CEO Paul Anderson, who came from Duke Energy.
In their first two years, BHP got rid of 2,000 employees and A$6.9bn worth of assets. They then merged BHP with Billiton, creating the world’s biggest miner. And best of all the merger worked, a rarity in M&A.
A key legacy of his stint as CEO, analysts say, is the financial discipline he brought to BHP. He ensured it grew fast enough to capitalise on the commodities boom while avoiding the ill-conceived spending of the past; and all the while, returning cash to shareholders. A tradition that has continued.
Shortly after he took charge as CEO, it was announced that BHP would increase its capital management programme by more than four times to US$13bn, beginning with a US$2.5bn off-market return in Australia.
With the Singapore government tapping the reserves, someone with a track record of returning cash to shareholders while growing the portfolio is needed.
There is no Singaporean with these skills.
And as to the disagreement with the board, maybe he wanted to do big deals, while the board had already decided Temasek should become a hedgie.
And maybe his deals would have been in the extractive industry (mining and oil & gas). Remember MM had said GIC would not invest in mining ventures, because he didn’t understand mining? Though now that Temasek is dipping its toes in mining and oil & gas, Chips and the recently departed Michael Dee (ex-Morgan Stanley’s MD in oil town Houston) would be missed.
RiskMetrics, an international share proxy advisory service, issued a critical assessment of the AIA takeover bid, saying while a deal had “a sensible strategic rationale”, Prudential was paying a heavy price.
FT reported that RiskMetrics said Prudential was paying US$35.5bn for a company with US$1.6bn in post-tax operating profits.
“For this to work, profits have to grow substantially beyond the expected cost synergies. Our analysis indicates that Prudential needs very high growth rates at AIA to only meet a reasonable return on invested capital, something that seems a stretch when managing a difficult integration process.”
Let me know when our local media report this story.
BTW GIC’s interest in this stock shows that its analysis is different: it is willing to forgo jam today for jam tomorrow (maybe). Hmm must be MM’s 30-yr view at work. Wonder who is right. Remember shortly after he last said this , Temasek sold its BOA stock, just before the market recovered. GIC held on to its UBS and Citi investments.
Now it’s the Islamic Bank of Asia. Reading between the lines of the MSM spin, clear that its Islamic bank foray ran into serious problems. It now wants to focus on investment banking and become more active in private equity while remaining committed to growing its Islamic banking franchise in this region. And cutting back on financing because of losses when financing Gulf cos.
Sounds a bit like Aztech and Novena: having failed in what they were doing, they tried something new. “So easy meh?”
Why can’t Temasek exercise its prerogatives as controlling shareholder and get rid of the FTs. I mean the locals at CapitaLand are doing a gd job in Islamic financing. Juz being an FT doesn’t mean the right to “Fail, try again, fail harder” ; misuse of a misquote of Samuel Beckett.
Temasek itself is hiring locals in senior positions, ignoring the “FT is best policy” .
OK maybe I’m hard on the FTs at DBS http://atans1.wordpress.com/2010/05/14/dbs-how-to-solve-the-ft-problem/
But at the very least, they do not have the luck that Napoleon expected his generals to have. He expected his generals to be brave, competent and leaders as given in his meritocratic army: but luck was different.
Backgrounder on Islamic Bank of Asia
DBS owns 50 per cent plus one share in IB Asia’s capital of US$500 million.
The rest was contributed by investors from the Gulf Cooperation Council countries – Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates.
IB Asia said at the time [of its establishment] that it would offer commercial banking, corporate finance and capital market and private banking services, acting as a bridge for capital flows between Asia and the Middle East. (From BT)
Founding CEO retired last December. I’m not sure before or after Dubai World declared a debt moratorium causing problems for other Gulf companies.
No not again. Temasek does another natural resources deal, it was reported last week.
Temasek and Hopu Investment Management, a Beijing-based firm, are to spend more than US$1bn to acquire a stake in New York-listed Chesapeake Energy; a US producer of natural gas from shale rock. They follow other foreign investors into the sector.
They agreed to buy US$600m of convertible preferred stock and have an additional 30-day option to acquire a further US$500m of the stock, which they are “highly likely” to exercise alongside other investors. Bloomberg reports.
Cynics must be wrong to continue believing that the government (and MM lee in particular) controls the decision-making process at Temasek. Temasek has the independence to do the wrong things. Bit surprising that Temasek’s PR machine does not highlight this. Are there subversives in the PR department that want to hide the truth of the relationship between Temasek and the government from the public. Friends of SDP and Dr Chee?
But still, one would have tot Temasek would listen to someone whom Time magazine rates as among the 100 most influential persons in the world. Sigh, reminds me that somewhere in the bible there is something about a prophet being without honour in his own home.
Let’s hope that the Fates do not punish the hubris of Temasek’s management. We lose.
BTW three mining deals you may not be aware of
It agreed to buy a peanutty US$50 million stake in the January share sale in Hong Kong by SouthGobi Energy Resources Ltd., a coal producer operating in Mongolia.
It provided funding for Niko Resources Ltd.’s $300 million acquisition of Black Gold Energy LLC. Temasek bought the C$310 million convertible bonds issued by Niko, the Calgary-based oil and natural-gas explorer said in a statement on Dec. 30.
And it bought 382,000 additional shares in Freeport-McMoRan Copper & Gold Inc., the world’s largest publicly traded copper producer, in the first quarter, according to a recent filing with the SEC. Based on a closing price of US$70.24, that additional investment was worth about US$27 million, “peanuts”.
According to a Reuters report, it has also recently bot C$500 million in Inmet Mining and a peanutty US$50 million in Platmin over the past two months.
Standard Chartered expects Indian profits to exceed HK for the first time next year, Richard Meddings, finance director, told the Financial Times. Hard to believe as HK is its core market.
But then StanChart executives, including Peter Sands, the group’s CEO, were in Mumbai to announce that the bank had obtained regulatory approval to become the first foreign company to list on an Indian stock exchange.
So a little cynicism is in order?
Seriously, Temasek with 19% of StanChart, must be commended for investing in a bank that now has as its two major markets, HK/China and India. Makes up for that FT dominated mongrel, DBS. Time to strip DBS to a local retail bank, and rename it POSB? Who needs one Asian champ and one Asian chump?
When you think about it, Temask’s banking strategy (Asian prong: stakes in two major Chinese banks, StanChart, and in Asian banks in Indonesia, M’sia, Pakistan etc) worked. Where it went wrong badly was in its Western investment banking strategy buying into Merrill Lynch and Barclays and cutting its losses when the hedgies were buying.)
Moral of story, something Dr Goh could have warned them against: “Ang Moh tua kee” strategy does not work.
A new person helps, after a bad performance patch, even if the those replaced cannot be faulted.
Ahmad al-Sayed became chief executive of Qatar Holding in October 2008. And it has tried to take advantage of the financial crisis by picking up stakes in Barclays, Credit Suisse, Porsche, Volkswagen and Canary Wharf Group. And now buying the whole of Harrods.
Qatar Holding is the prime vehicle for strategic and direct investments by Qatar and is a division of the Qatar Investment Authority, founded in 2005 to diversify the emirate’s assets away from oil and gas.
Suggestion on how to motivate GIC, Temask staffers
What the Qataris are planning to do with Harrods shows an “adding value” mindset, rather than a passive attitude
FT reports: Qatar Holding is considering whether to launch a flagship Harrods outlet in Shanghai following its £1.5bn purchase of the London department store this weekend.
Trying to replicate the success of Harrods’ Knightsbridge store overseas is one of four areas now up for discussion as part of Qatar Holding’s three-month strategic review of the business.
Ahmad al-Sayed, chief executive of Qatar Holding, will also investigate developing a luxury online store, expanding the Harrods brand beyond teddy bears and souvenirs for the mass market, and giving the London flagship store a makeover in order to expand the selling space.
Of course owning all of a private investment helps. Maybe Temasek should be more aggressive in pursuing non-listed companies.
Ahmad al-Sayed, chief executive of Qatar Holding, told the Financial Times that the acquisition of Harrods was part of a strategy to acquire “prestigious top-performing businesses and to buy them at the right point in the cycle”.
Qatar Holding is the primary vehicle for Qater’s strategic and direct investments. It is an arm of Qatar Investment Authority (QIA), which was founded in 2005 to strengthen its economy by diversifying into new asset classes.
Temasek’s investment strategy centres around four themes:
• Transforming Economies
- We invest in industry sectors that correlate with the economic transformation of the country
• Growing Middle Income Populations
- We find opportunities in companies and industries whose growth is fuelled by the increasing purchasing power of middle income populations
• Deepening Comparative Advantages
- We tap the potential of competitively-positioned companies
• Emerging Champions
- We identify companies proving to be best-in-class, be it regionally or globally.
GIC simply says, The group strives to achieve good long-term returns on assets under our management, to preserve and enhance Singapore’s reserves.
Note nothing about trying to time investments. Maybe thaz why they messed up big-time on Merrill Lynch, Citi and UBS. Even MM admitted that much saying they went into too early into financials.
Now Qatar’s track record is not that great either: but at least it sets out a benchmark on which it can be judged.And it shows it is aware of the importance of timing.
BTW a lot of Buffett’s skill is in knowing when to be greedy.
GIC’s strategy is