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Posts Tagged ‘Temasek’

Our SWFs owned four out the10 biggest investment flops of the last 10 yrs

In Financial competency, GIC, Temasek on 26/02/2012 at 6:35 am

(Or “GIC may have bot another dog”

They owned significant stakes of the four (BoA, Citigroup, UBS and Barclays) of the 10 biggest dogs that had fleas on their fleas between 2002 and 2012. To be fair, the big stakes were bought in late 2007 or early 2008. GIC and Temasek each has two dogs to their shame. GIC still owns stakes in UBS and Citigroup. Temasek cut its losses at the nadir of the financial crisis of 2007-2009, in early 2009, allowing hedgies and Arabs to make money on BoA and Barclays.

http://www.economist.com/blogs/graphicdetail/2012/02/daily-chart-8

(Remember how the constructive, nation-building local media were trumpeting the purchases as indication that our SWFs were “the greatest”. Well they were “the greatest”: the greatest mugs. Funny our media never told us that.)

Hope GIC’s big stakes in Glencore and Bunge (both commodities traders, the former in metals, the latter in agricultural products) don’t go the way of UBS and Citigroup (big banks).

GIC now has over 5% of Bunge.

Via shares and convertible bonds that convert into Glencore shares, it also has a significant stake in Glencore. GIC has been doing some financial engineering to reduce its cost of Glencore shares, which I assume it bot at the IPO. The price has fallen 18% since then. As to its convertible bonds, it is getting a good interest rate of 5% but the equity value of the bond is 17% down, I calculated.

GIC recently raised its stake in Xstrata by 20%  and trimmed its holding in Glencore International after the companies said they planned to combine. GIC has increased its Xstrata stake to 29.05 million shares from 24.1 million shares since Feb 8, the day after Glencore offered to acquire the shares in Xstrata it doesn’t already own for US$37.6 billion, data compiled by Bloomberg show. GIC cut its Glencore stake by 21% t to 33.2 million shares.

Thai co outbids Shell

In Energy, Temasek on 25/02/2012 at 10:36 am

Thai oil and gas company PTT Exploration and Production said on Friday that it had submitted a rival US$1.7 billion bid for energy exploration Cove Energy, trumping a previous offer from Royal Dutch Shell by 12.8%. PTT is state-controlled and is the second largest listco on the Thai stock exchange. It is capitalised at slightly more than US$19bn.

http://dealbook.nytimes.com/2012/02/24/ptt-makes-rival-bid-for-cove-energy/?nl=business&emc=dlbkpma21

Remember Chips Goodyear? He was going to be Temasek’s CEO before he quit Temasek’s board. Seems he wanted Temasek to make these kind of big mining or energy bids. Seems this was too exciting for Temasek or its shareholder. 

Temasek’s StanChart bonds: No losers?

In Banks, Temasek on 24/10/2011 at 6:59 am

Despite the following and other rants, ‘Temasek’s S$650m issue of bonds exchangeable into StanChart shares was oversubscribed.”The order was $1.25 bn,” it was reported. I was not surprised.

Singapore Notes ranted, Stanchart shares are currently trading at £13.73 (yesterday’s quote); the highest level reached during last year was £19.75. The British £ has also taken a pounding, diving from S$2.90 to S$2 yesterday, a stomach churning plunge of 30%. Yahoo! Finance indicates today’s range will be £1.9907 – £1.9937.

So what fool (as in “fool me, hah?’) would bet that the Stanchart share price would go up 27% in 3 years’ time? That’s a tantalising return of 9% per annum, assuming the pound-euro correlation doesn’t get any worse. Reuters is reporting a sterling drop, as latest UK data adds to the gloomy outlook.

Juz look at the volatility of the share price. In the last 12 months, it has been up to £19.75. More than 27% from current prices. And in November 2008 it was trading around £8. Investors buying the bonds are betting that StanChart’s share price recovers within three years. Not an unreasonable bet, given the volatility of StanChart’s (and other banks’) share price in recent years. Interesting chart.

At worse, they lose their funding costs (if they borrow money to buy the bond) or opportunity costs (if they invest in cash or bonds) for three years. Their upside is 27%++.

To quote Reuters Breakviews, One part would be a zero-yield bond, with a face value of S$36. Assume lenders to triple-A rated Temasek normally demand a 1.8 per cent annual return, and the bond is worth around S$34.50 today.

The other part is a call option on Stanchart shares.

Plug the lender’s current price, its forecast 3.5 per cent dividend yield, and the implied volatility of Stanchart’s stock into an options calculator, and it looks to be worth S$4.50.

Put together, the two bits of paper have a total value of S$39 – some 8 per cent more than investors paid. Taz why the issue was oversubscribed.

Unlike me, the writer thinks it ain’t such a gd deal, But it’s probably not such a sweet deal. The value of the call option is inflated because Stanchart’s shares are twice as volatile as they were before the summer.

If the shares return to their steadier state, the option is worth closer to S$1, leaving the value of the whole package a little below the sticker price. I think volatility will persist.

‘The writer goes on to talk about the deal’s advantages for Temasek, For Temasek, there are obvious attractions. Even if all the bonds are exchanged for shares, it will retain a 17 per cent stake in Stanchart.

And if the shares don’t rise much, the fund will have borrowed S$650 million interest free.

But for all that, the savings are small. Say Temasek had simply borrowed directly from the bond markets. Over three years, its total interest bill would be less than S$40 million.

Moreover, the bond issue triggered a mini-rout in Stanchart shares, leaving Temasek with a paper loss on its remaining stake 10 times the size of the interest costs it saved.

Other than demonstrating its financial prowess, Temasek doesn’t have much to show for its wizardry. True but given the jitteriness of the markets, the shares would have fallen for other reasons. Banks are not the flavour of the month.

Temasek’s StanChart Bond Issue

In Banks, Temasek on 19/10/2011 at 2:45 pm

I’m surprised that a blogger whom I respect could get it so wrong with his analysis of Temasek’s stake in StanChart and the share price that investors can buy into StanChart via Temasek’s latest bond issue.

Singapore Notes reports, “The zero coupon bonds which mature in 2014 can be exchanged for Stanchart shares at £36.29 per share during a 3 year holding period, a 27% premium over Monday’s price of £14.29 on the London Stock Exchange.” A 27% premium to £14.29 works out to £18.15. not £36.29.

As to the value of Temasek’s stake in S$, he used as his starting point, “the purchase of a 11.5 % stake from Khoo Teck Puat’s estate in 2006. Then Stanchart shares were trading at £15.24, when the exchange rate was S$2.90 to £1.”

Since then there have been two massive and deeply discounted rights issues. The one in November 2008 was done at  £3.90, a 48.7% discount to the last done share price before the rights issue announcement. The rights ratio was 30 new shares for 91 existing shares. In October 2010, it called for a 1 for 8 rights issue priced at £12.80, a 32% discount to the last done share price before the rights issue announcement.

Temasek: Where things can go wrong.

In China, Temasek on 19/10/2011 at 6:44 am

Credit Suisse analyst Sanjay Jain said in a report last week that he thinks that up to 12%  of all of China’s outstanding loans may go bad and non-performing loans may likely account for all of the banks’ equity. Current NPL ratios hover at around 1% or the top Chinese banks.

Ops a daisy. As Temasek has major (and so far very profitable) stakes in two of China’s top four bank, Bank of China (4%) and Construction Bank of China (7%), predictions such as this (and Credit Suisse is not alone, just the latest and most pessimistic) should worry S’poreans.

As Temasek got the initial substantial stakes at bargain prices (courtesy of the Chinese government), selling part or all these stakes requires Chinese approval. At a time when the Chinese government is supporting the shares of the major four banks, such approval is unlikely.

Not another debacle like Shin, ABC Learning, Merrill Lynch or Barclays in the making?

A TLC where losing $1m is “peanuts”

In Corporate governance, Temasek on 20/09/2011 at 7:19 am

This is the impression I get after reading in the nation building, constructive ST that the new CEO of Wildlife Reserves Singapore (WRS) abruptly cancelled the Night Safari’s Halloween Horrors event, despite the WRS having spent close to $1m on organising this popular annual event. This means that close to $1m will have to be written-off, as there will be no revenues from this popular event.

It’s not as though the WRS (owned 80% by Temasek and 20% by the S’pore Tourism Board) is rolling in money. I understand that this is one flea-ridden animal that cannot be sold because it is in constant need of financial injections. So she must have consulted and gotten her board of directors’ approval, before taking a million dollar hit.

So the board too must think that $1m is “peanuts”. Not their money leh. It is our money. We own Temask and the tourim board.

But let’s to fair to the CEO. Maybe she had a revelation from her god that god would provide, and that she convinced her board that her god was stronger than the devil. But what if she goofed? She has form in goofing.

The last thing newly elected president, Dr Tony Tan, needed after a bruising election campaign was for for his comments on the need to have more famiy bonding activities to be linked to the CEO’s cancellation of a popular event. “He kill-joy or something worse?”, I could hear the bloggers thinking. after her attempt at linkage. He was not amused and she had to apologise for her most unfair attempt to link his comments to her action.

Finally, does the devil have friends? 

She is getting a terrible press from the ST. Are there devil-worshippers among the reporters and editors of the ST? Remember they have form when it comes to attacking Christians, the devil’s arch-enemies. A few years ago, DPM Wong Kum Seng pointed out that the ST’s coverage of the AWARE fight was biased against the Christian members who opposed the old guard who they accused of promoting anal sex and homosexuality in schools. Note that the government withdrew AWARE’s status as a provider of sex education services to schools after the allegations were made.

Temasek the hedge fund?

In Banks, China, Temasek on 01/09/2011 at 8:29 am

A consortium that includes Temasek and its wholly owned hedge fund Seatown Holdings has acquired a 5% stake in China Construction Bank it was reported on 30 August 2011

It had unloaded a portion of its own stake in the Chinese lender about a month ago, when, by my calculations, the price of CCB shares was  abt 10% higher. And given that it bought the latest batch of shares at a discount, Temask could have made 20% on the sale and repurchase.

Gd trade.

Description of trades

http://www.nytimes.com/reuters/2011/08/30/business/business-us-bankofamerica-ccb.html?nl=business&emc=dlbka32

China: Not immune to Western slowdown?

In China, Economy on 24/08/2011 at 8:31 am

China, the world’s biggest exporter and second biggest economy, is still booming. Its GDP is expanding at about 9% a year and since the 2008 financial crisis, China has helped keep the global economyfrom falling in a recession. But, as the BBC’s  Damian Grammaticas reports, China may not be immune if there is a new slowdown in the US and Europe.

http://www.bbc.co.uk/news/world-asia-pacific-14578083

S’poreans have two reasons to be interest in the issue. We depend on global growth and Temasek itself, TLCs, other GLCs (like Ascendas) and GIC have big bets on China.

Why the PM should ask Tony Tan to return to active duty

In GIC, Political governance on 07/08/2011 at 9:19 am

The finance minister has come out to say that the world economy will undergo a rough period three or four years.

Tony Tan helmed GIC through a very rough period recently and all indications are that GIC had a good crisis compared to Temasek. An example: Temask lost billions cutting losses within 15 months on its so-called 30-yr investments, Merrill Lynch/ BoA and Barclays. True GIC has a 50%ish book loss on UBS but it made money on Citi, its 30-yr investments. http://atans1.wordpress.com/2011/07/26/gic-not-reported-in-st-cna-or-today/

If Tony Tan becomes president, he is only the security guard of the the reserves, True he can advise the PM, but the PM and S’pore will lack Tony Tan’s executive skills in a financial crisis.

So the PM should tell Tony Tan, “No more of this presidential rubbish, especially as your can’t communicate with “lesser mortals” to save their lives. Return to active duty for the sake of S’pore.”

And if TKL becomes president, so what? The PM can always get the doctors to certify him medically unfit to serve as president. They can use this very recent example

After the law minister made this statement, “The president cannot reject advice given by the Cabinet And he cannot engage in public debate with the government,”, TKL issued a statement implicitly agreeing with the minister. http://tankinlian.blogspot.com/2011/08/voice-of-people-and-constitution.html

Less than 12 hours later (albeit overnight), he came out to disagree with the minister saying, “I do not agree with his view that  the President cannot speak about anything else without the approval of the Government. I find the Law Minister’s interpretation to be too narrow. It seemed to give the President less freedom of speech than an ordinary citizen of Singapore.” http://tankinlian.blogspot.com/2011/08/statement-from-tan-kin-lian-can.html

Shouldn’t he have said this in the first place?

And as to Tan Cheng Bock, if he was good enough for one Lee Kuan Yew to ask him to serve as a PAP MP when being asked to serve as a PAP MP was seen by the public as an honour unlike today (when the likes of  Kate Spade Tin, Foo, Wee Kiak and Puthu can become PAP MPs) , and for the government of the day (which the PM was a part) to ask him to head a feedback unit, waz the problem of having him as a security guard president?

And as the law minister said, the PM can ignore his advice. Say if and when he asks the PM to think of the people when making policy decisions.

 

Temasek: 4 senior departures in 9 mths

In Temasek on 24/07/2011 at 7:03 am

When there is an average of one senior departure every 2.25 months in a listed company anywhere in the world,  the board of directors and CEO are under a lot of pressure to explain the departures. Shareholders, investors and the media want to know if there is something amatter with the company, how serious is it, and what are then plans to fix the problem.

But when the company is Temasek (the SWF that invests our money), the board and CEO face no such pressure, it seems.

The CEO of Fullerton Fund Management, fully owned by Temasek, resigned in late October last year. His acting successor left in February this year. “Hsieh Fu Hua, a member of Fullerton’s board of directors and executive director and president at Temasek Holdings, will work closely with Fullerton’s chief investment officer and chief operating officer to guide the firm until a new CEO is appointed,” it was announced. http://www.reuters.com/article/2011/02/07/fullerton-ceo-idUSL3E7D702720110207

He is still there it seems. FYI, there are rumours that this unit which manages the money of foreigners suffered badly during the 2007/2008 financial crisis, and the recovery has not helped it much.

This week, two other units had leadership changes.

Charles Ong and Nasser Ahmad quit as co-CEOs of Seatown, the “hedge fund” of Temasek. But Ong is not leaving the Temasek group. Ahmad is reported as leaving to return to the private sector. http://atans1.wordpress.com/2011/07/19/reshuffling-the-chairs-aboardtemaseks-hedge-fund/

Then Francis Rozario resigned as CEO of Temasek’s Fullerton Financial Holdings, the unit that invests in Asian banks. http://atans1.wordpress.com/2011/07/20/temasek-loses-74-of-pakistani-investment/

Again like in the case of Fullerton Fund Mgt, their replacements are from the parent company.

Given the frequency of the changes, surely S’poreans should be told if these changes are a statistical fluke (like several 100-yr or 50-yr floods in the space of 12 mths), or if there is something amiss at the manager of our money?

Fat chance. Pigs will fly or Tan See Jay will get his COE or TKL will get elected as president before any explanation is given.

Temasek loses 74% of Pakistani investment

In Temasek on 20/07/2011 at 5:22 pm

“According to estimates by Pakistan’s Invisor Securities, Temasek has invested about US$540 million (S$657 million) in NIB and is sitting on a paper loss of about US$400 million.”

This quote appeared as the last sentence of a Reuters article carried by our nation building, constructive Today. The article was abt Francis Rozario resigning as CEO of Temasek’s Fullerton unit, the unit that invests in Asian banks.

Coming back to the loss, this means NIB is worth only US$140m, and that Temasek has an unrealised loss of 74%.

Update at 6.15pm on 20th July 2011: ST has the same story. And the above quote too appeared as the last sentence. Some people were careless in editing the story for us “daft” S’poreans. Interestingly, BT doesn’t report the resignation.

Reshuffling the chairs aboard Temasek’s “hedge fund”

In Temasek on 19/07/2011 at 7:08 am

Charles Ong and Nasser Ahmad are quitting as co-CEOs of Seatown, the “hedge fund” of Temasek reports Bloomberg.

Mr. Ong, who is also senior managing director of special projects at Temasek, will remain at Temasek. Mr. Ahmad will be returning to fund management.

For the record, Charles Ong was the point man on the Shin Deal that lost billions.

Related postings

http://atans1.wordpress.com/2010/02/22/temasek-the-significance-of-seatown/

http://atans1.wordpress.com/2010/03/06/better-at-destabilising-than-investing/

Temasek: Confused

In Temasek on 13/07/2011 at 6:31 am

One of the criticisms that has been made of Temasek is that it does not publicly show the breakdown in performance between its legacy assets (acquired before 31 March 2002) and its post-March 2002 assts when it became a very active investor.  Because Ho Ching became CEO in 2002, this would also show how well Temasek did with her in charge.  Waz her performance like? Do the Merrill Lynchs, Barclays, Shins and ABCs outweigh the StanCharts and Chinese banks; or vice versa?

Well we now have an idea. In its latest annual report, Temasek said, “Investments made since 2002, when we stepped up our exposure in Asia, delivered annualised returns of almost 21% to Temasek”, while investments made before March 2002 delivered annualised returns of 11% over the last nine years.

It also showed that of the S$193bn in portfolio assets as at 31 March 2011, S$100m were post March 2002, while only US$93m were legacy assets. http://www.temasekreview.com.sg/investments/inv_framework.html

And in a presentation slide, it said that S$100 in these new assets in 2002 would be worth S$550 today while S$100 in legacy assets would be worth S$270.

(All these also appeared in newspaper ads.)

The numbers look gd.

Problem is that I have conceptual issues linking  this information with the information given on other pages of the report (which indicate, as ST reported, that its recent performance is OK but nothing great), and the presentation. I also have questions on the definitions of certain terms used and the methodolgy used. As I doubt Temasek would entertain questions from me, I will remain confused.

Another problem I have is that our constructive, nation building MSM did not declare Ho Ching an investment genius. On the face of it, 21% annualised returns over nine years  is to be praised, not kept quiet about. At a time when her hubby is having to deal with the anger of many voters over govmin policies and the incompetent arrogance within the PAP, surely playing up the role of Ho Ching is sumething our media should be doing. At least he has an investment genius as his Mrs.

Reminds me of the Sherlock Holmes mystery that he solved by asking the question, “Why didn’t the dog bark?” Why I don’t know.

Experts differ on prospects for China; but we got big bets on China

In China, Temasek on 20/06/2011 at 9:36 am

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.

http://atans1.wordpress.com/2010/02/08/tlcs-in-china-groupthink-or-mastermind-at-work/

http://atans1.wordpress.com/2010/09/03/sporeans-temasek-may-have-a-problem/

So does GIC.

Spending S$4.9bn justification for S$470bn +++ reserves?

In Political economy, Political governance on 24/05/2011 at 9:37 am

President S R Nathan said recently that the recent recession, in which the government for the first time sought his office’s approval to draw on reserves, has validated the need for Singapore to have strong national reserves.

He must be talking of the S$4.9bn that was used to fund the government budget in 2009 and which has since been returned.

Juz taking into account the monies managed by GIC, and Temasek’s funds,  our reserves then were at least S$470.3bn. This means that only 1% were used to fund the recession budget.

Do we need such massive reserves when we draw-down so little, given that the reserves are not the result of nature’s bounty but of the people’s savings.

http://atans1.wordpress.com/2010/11/02/how-we-fund-our-swfs/

http://atans1.wordpress.com/2010/11/19/property-sales-also-fund-our-swfs/

Apple has more cash than GIC & Temask combined

In GIC, Temasek on 27/04/2011 at 9:28 am

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.

What are in our reserves? A revisit

In Political governance on 17/04/2011 at 11:27 am

As minister Mah has again talked rubbish, this time that cheaper HDB flats will raid our reserves, I tot I should paint a mental picture of how our reserves, CPF and SWFs are linked, and in the process show that he is talking rubbish when he talks of our reserves being raided, if HDB flats’ selling prices are lowered.

Visualise a big glass tank. Above it are three pipes, below it is one pipe. When the taps are open, water flows in from the pipes on top and water flows out from the pipe below.

The water flowing from the pipes at the top represent the income that goes into the Consolidated Fund (tank). From one pipe would flow income from all the taxes (income tax, VAT, property etc), service charges and fines levied. From another another pipe would flow the permitted returns from our reserves. From the final pipe would flow the money from government borrowings*. The money from the special CPF bonds would be part of the flow from this pipe. The water flowing out from the pipe below represents government spending.

There is no water in the tank when the outflow (expenditure) exceeds the inflow.

But there will be water in the tank if the inflow exceeds the outflow.

Now imagine a ballon hovering just above the water. It has a hose syphoning out water from the tank. The ballon is the reserves taking surplus $ from the Consolidated Account. The ballon has another hose sucking air into the ballon: this represents the proceeds of “sale of state land”. This shows that minister Mah is wrong in his assertion that cheaper HDB flats raid the reserves. All that happens is that less goes into the reserves. Is this a bad thing. I doubt it as we got lots of money in our reserves, Temasek’s 2009 losses notwithstanding. (Our SWFs managing only a part of our reserves have 179.5% more in assets than S’pore’s 2009 estimated GDP. I calculated this in November 2010.)

The ballon keeps growing while another hose pumps some of the water into the reserves pipe which flows into the tank.

And where is GIC and Temasek? They and the central bank manage what is in the ballon.

http://atans1.wordpress.com/2010/11/02/how-we-fund-our-swfs/

http://atans1.wordpress.com/2010/11/19/property-sales-also-fund-our-swfs/

—–

*Accounting for loans:

When any government or company or person borrows, the money borrowed becomes the income of the  borrower. So when the government borrows money from the CPF by using the special bonds, the money borrowed becomes part of government income.

The interest payments on the special CPF bonds and other borrowings are part of government expenditure.

Citi’s a US bank in name only

In Banks, Emerging markets, GIC, Temasek on 19/03/2011 at 6:04 am

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,

Article

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 »

Lesson for our SWFs

In Corporate governance, GIC, Temasek on 17/02/2011 at 9:18 am

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.

China: What we don’t hear from our MSM

In China, Economy, GIC, Temasek on 21/01/2011 at 5:16 am

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.

Q&A

Backgrounder: S’pore Inc has big bets on China

Keep calm, carry on — No need to rant against Temasek

In Indonesia, Temasek, Uncategorized on 23/12/2010 at 5:27 am

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.

GLP’s non-action:Implications for SGX’s bid for ASX & S’pore Inc

In Corporate governance, GIC, Logistics, S'pore Inc, Temasek on 16/12/2010 at 5:22 am

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 fall 6% in 2 days

In Banks, Emerging markets, Temasek on 13/12/2010 at 5:17 am

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.

Welfare: Jam to-morrow and jam yesterday – but never jam today

In Economy on 09/12/2010 at 5:20 am

When read I this “prudence and discipline” article last Friday* reporting a speech on S’por’e welfare system (past, present and future) by the PM, I was reminded of the conversation between Alice and the White Queen in Lewis Carroll’s book Through the Looking Glass and What Alice Found There”.

In the book the White Queen offers Alice “jam every other day” to work for her: “The rule is, jam to-morrow and jam yesterday – but never jam today … It’s jam every OTHER day: to-day isn’t any OTHER day, you know.

“[J]am to-morrow and jam yesterday – but never jam today” has since then become an expression for a never-fulfilled promise, which is what many think the promise to help the poor has become.

What annoyed me was that the PM  doesn’t understand the issue: saying we couldn’t afford European style welfarism. Trouble is no-one sensible is asking for this, certainly not the opposition parties or the do-gooders.

The ex-head of the civil service and now chairman of the Public Service Commission showed he “got it” when he said at a recent speech in the US to S’pore  scholars: “More and more citizens, especially younger Singaporeans, agonize over the fact that there are still poor people in wealthy Singapore.”

The issue is the smallish amount of welfare payments relative to the Budget. Take Workfare the govmin’s flagship programme. It  has the right idea but is too ungenerous.

The PM in November said abt Workfare: “[A] total of $1.65 billion in the last five years, or $400 million a year, to help 400,000 low-income workers”. The Finance Minister said in February this year that the enhanced Workfare scheme will cost the government S$100 million annually. So the spending on Workfare is now S$500m or 1.5% of the operating expenses in the latest Budget. Still peanuts. And yes I know that 1.65bn divided by 5, doesn’t equal 400m. Taz why I quoted the exact words.

And if the govmin is concerned that increased annual payments to the poor will lead to moral degeneration and the destruction of its “Work will make you free” philosophy (seriously though, there is the very human issue of rising expectations and politicians pandering to the voters), why not try Kaushik Basu’s solution? The Cornell University professor, and chief economic adviser to India’s finance ministry, says it is not enough that the income of the bottom 20% rise at the same percentage rate as the average. Instead, they should get an equal absolute share of the income the economy.

This would mean only a one-off transfer of S$3.1 billion to the poorest 20% of S’poreans. Less than Temasek’s realised loss on Merrill Lynch. Temasek could have lost as much as US$4.6bn (in 2009 March this would have been S$7bn) on Merrill Lynch. (BTW, March 2009 was not gd for Temasek. The much smaller loss on Barclays (800m sterling?, was then worth abt S$ 1.7bn ).

(http://atans1.wordpress.com/2010/10/13/minimum-wages-missing-the-point/ for more on these)

We got the money for more “jam today”.  We don’t need to borrow to fund enhanced Workfare. Read the rest of this entry »

CitySpring Infrastructure Trust: a TLC dog with fleas

In Infrastructure on 08/12/2010 at 5:21 am

As regular vistors to this blog will know, I’m a sucker for yield and NAV plays. So I was starting to think abt CitySpring Infrastructure Trust which offers a prospective yield of abt 7%. It is also a Temasek-linked trust and could possibly be trading at a discount to NAV.  An investing sweet spot.

Fortunately before I even got to reading up the basic data on the trust, I chanced across a Kim Eng Eng Research report dated 30 November, which called the trust a ” sell”.

To forestall a credit rating downgrade of the three bonds issued by Basslink, CitySpring Infrastructure will set aside A$20 million (S$25.4 million) in an escrow account for this asset before next January. Although this move may resolve the CreditWatch placement by Standard & Poor’s (S&P), a capital structure plan involving an equity cash call seems inevitable in our view. So, while the forward yield of 7.1 per cent based on the previous DPU guidance appears compelling, there is no denying the risk of dilution.

… The bonds, worth a total of A$866 million, face a potential ratings downgrade that will trigger a cash lock-up at Basslink and affect CitySpring’s distribution policy … CitySpring will still need to submit a capital structure plan that will satisfy S&P’s stringent risk assessment. It plans to do so by next September. As one of the options, Basslink’s cash flow may be applied to reduce debt … A capital structure plan involving an equity recapitalisation seems highly possible in our view, given the presence of other debt obligations, such as the $142 million corporate loan due in August 2011 and the $130 million City Gas loan due in 2012. Even if Basslink continues to pay a distribution, unit-holders’ yield may still suffer a dilution.

We cut our DPU forecasts for FY March 2012 and onwards from 4.2 cents to three cents to factor in the removal of Basslink’s contribution. Our TP is lowered to $0.52, reflecting our assumption of a capital injection of $100 million to reduce gearing. Downgrade to ‘sell’.

Looks like the perfect storm. And I’ve found out that it’s last reported NAV is 0.34cents.

But I’ll monitor the trust, waiting for the capital raising exercise which I agree must come. It might then be like AIMAMP industrial reit or Fraser Commercial* — gd yields and discount to NAV to compensate for the overhang of units created by the rights issue. BTW, for waz it’s worth, I read in Monday’s ST that OCBC’s reit analyst and DBS’s  head of asset-backed structured product like industrial and office reits.

Investors in the Mapletree s-reits may want bear in mind that this trust was once a high-flying investment trading way above NAV, and giving gd yields. Until it the managers went walkabout in Oz Outback. Being part of the Temasek stable doesn’t mean that one can “close eyes and buy and hold”.

*office and malls (here and in Oz)

What S’pore and Ireland have in common?

In Economy on 25/11/2010 at 5:17 am

No not because S’pore is heading for insolvency etc if Tan Kin Lian is to believed http://tankinlian.blogspot.com/2010/11/will-singapore-face-same-outcome-as.html

We and the Irish are dependent on MNCs.

Mr Honohan [the Irish Central Bank governor] … points out that Ireland’s official GDP and unit labour cost statistics have consisently overstated the size of the Irish economy and its productivity respectively – largely because that economy is so dependent on multinationals with headquarters in the Republic, whose high profits acrrue to the overseas owners of those multinationals rather than to Irish residents.

That overstatement of the magnitude of the output of Irish residents, which in some real sense is attributable to those residents, could be as much as quarter, he says. Excerpt from Robert Preston’s blog on BBC Online.

Here, where the economy too is dependent on MNCs, this means that the economy is not as big as the stats imply. And that productivity is even worse than the already lousy numbers show*. The latter isn’t juz Reform Party spin. Remember there is yet another government campaign to raise productivity going on.

Perhaps the fact that the economy is smaller than the stats imply  is why the government seems obsessed by the need to build up the reserves. We will (not might) need the rainy-day money, one day. Question of “when” not “if”.

Read the rest of this entry »

Property sales also fund our SWFs

In Economy, GIC, Property, S'pore Inc, Temasek on 19/11/2010 at 5:13 am

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]

StanChart has no plans to buy DBS

In Banks on 11/11/2010 at 5:28 am

The CEO of StanChart’s SE Asian operations said recently that Standard Chartered had no plans to spend the proceeds of a £3.3bn (US$5.3bn) rights issue on a significant acquisition in Asia. The bank planned to expand in the region largely through organic growth, rather than acquisitions.

The bank was not looking for any “transformational transactions” in SE Asia, although it might seek to acquire small businesses specialising in sectors or products that would add to its operations.

This would rule out a bid for DBS. Many had speculated (self included) that the bank might be preparing to spend part of the rights issue proceeds on a large acquisition. A very few (self included) speculated that DBS was a target, given that DBS is so badly managed and Temasek is a controlling shareholder in both.

DBS reminds me of StanChart in the 70s and 80s, when the latter got almost everything wrong. Only in the 90s did it get its act together. For younger readers, in the 60s Hongkong Bank and StanChart were roughly the same size, even though the former was already the leading bank in HK.

Standard Chartered bought two smallish S’pore-based businesses

– an aircraft leasing business in 2008; and

– a small factoring business earlier this year.

In 2008, it bot the private banking business of American Express in £430m.

India doesn’t trust our SWFs

In GIC, India, Temasek on 11/10/2010 at 4:31 am

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?

StanChart a takeover target?

In Banks, Emerging markets, Temasek on 22/09/2010 at 5:24 am

(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.

Temasek: Financial engineering STATS

In Private Equity, Temasek on 15/09/2010 at 5:11 am

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.

StanChart: Getting too aggressive?

In Banks, India, Temasek on 10/09/2010 at 5:11 am

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.

GIC: a problem at Citi

In Banks, India, Temasek on 08/09/2010 at 5:49 am

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.

S’poreans, Temasek may have a problem

In Banks, China, Temasek on 03/09/2010 at 6:52 am

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?

Sigh

Dogs? Temasek’s Chinese bank investments

In Banks, China, Temasek on 26/08/2010 at 5:15 am

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.

Temasek, CapLand: What abt these Chinese property charts?

In China, Property, Temasek on 11/08/2010 at 5:15 am

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 »

Swee Say said that gd Temasek lost billions?

In Banks, Temasek on 04/08/2010 at 5:27 am

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.

Temasek: China banks’ loans

In Banks, China, Temasek on 31/07/2010 at 7:14 am

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.

Related post

http://atans1.wordpress.com/2010/02/08/tlcs-in-china-groupthink-or-mastermind-at-work/

Temasek: Shale gas is a long term investment?

In Energy, Temasek on 27/07/2010 at 5:37 am

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 »

Temasek: Smarter than Yogi Bear?

In Temasek on 22/07/2010 at 8:29 am

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: Why raise £? Buying oil minor?

In Energy, Temasek on 21/07/2010 at 6:18 am

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 »

Cambodia: There be value?

In Emerging markets, Temasek on 17/07/2010 at 7:20 am

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.

Temasek: Results Analysed

In Temasek on 08/07/2010 at 6:15 pm

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.

GE: Opportunities beyond China

In China, Temasek on 07/07/2010 at 5:31 am

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

http://atans1.wordpress.com/2010/02/08/tlcs-in-china-groupthink-or-mastermind-at-work/

Mentality of China bulls

http://atans1.wordpress.com/2010/03/12/understanding-the-mentality-of-china-bulls/

*But Google has a cunning plan to use Android to soften losses on search in China. Never count Google out.


Why GIC and Not Temasek?

In GIC, Temasek on 05/07/2010 at 5:20 am

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/

Temasek GIC ignoring Qatar’s ideas?

In GIC, Temasek on 04/07/2010 at 10:44 am

For example, when the Qatar Investment Authority is considering investments, “Government of Singapore Investment Corp and Temasek are our first ports of calls,” says one QIA executive. The QIA invested alongside CIC [China's premier SWF] in Canary Wharf, beginning a dialogue which executives say they intend to continue, FT reports.

Don’t recall any deals where GIC, Temasek co-invest with Qatar. Temasek, GIC giving Qataris the cold shoulder despite their better track record?

FT continues:

Moreover, these funds are becoming more discerning – since they have learned who is trustworthy, by virtue of making some expensive mistakes. For example, there is still a lot of bitterness about representations made when executives of Citi and Merrill Lynch (now part of Bank of America) sought rescue funds. “They were like used car dealers,” says one leading investor in the Merrill deal bitterly, referring to the dialogue with that firm.

When those rescue financings were first made, some sovereign investors in these deals were able to extract better terms than others, including anti-dilution provisions and the right to reset terms while others did not. Recently, KIA and GIC were able to partly salvage their investments by changing the terms, while Temasek disastrously sold its stake in Bank of America at the absolute bottom in February, locking in a multi-billion loss (in spite of the advice of some of its peers not to do so).

Those bitter experiences have not prompted the funds to entirely abandon their investments in the US. When Larry Fink needed to raise billions to help finance BlackRock’s purchase of Barclays Global Investors earlier this year, he was able to raise the money from GIC, CIC and the KIA in less than a day because they all know and trust him.

Qatar can teach Temask, GIC the value of patience

In GIC, Temasek on 04/07/2010 at 6:18 am

When GIC and Temasek did the mega banking (UBS, Merrill Lynch, Citi) deals in late 2007, early 2008, they faced competition for these investments. UBS shareholders were even upset that UBS did not call for a rights issue because they tot GIC had got a sweet-heart deal. So did GIC when it (and many other reputable investors) funded the purchase of rent-control premises in New York. We know what happened there.

Despite having a lot more money (derived from oil and not the savings and hard work of the people), Qatar was a lot more cautious than GIC, Temasek and to be fair to our SWFs, other Arab SWFs, not to say the Chinese SWFs. Only the Norwegians may have been more cautious.

So last yr, as Qatar’s Sandhurst-educated ruler, Sheikh Hamad bin Khalifa al-Thani, put it last year: “With the current crisis, many countries prefer to keep their money instead of investing it abroad. For us, though, this is an opportunity that will not be repeated in the next 20 years.”

Now lots of London is owned by Qatar.

Maybe we need FTs who are patient to advise us. Not FTs who are like us: impatient to get things done.

Oh and in October 2009 Qatar Investment Authority made a £600m profit on the exercise and sale of Barclays warrants, while retaining the other half of these instruments plus a direct 7% shareholding in Barclays. They made the investment in late 2008 and must have felt sick when in January 2009, when Barclays’ share price fell to 50p. Shortly thereafter Temasek exited from its Barclays investment made in 2007. To this day, no-one is sure how much it lost.

But all those who castigate Temasek and GIC (e.g.websites allied to Dr Chee and his SDP) for not being transparent should note that the Qatar Investment Authority does not publish an annual report.

BTW, this lady has no MBA, she dropped out of uni. But she advises the Qataris. A lesson for our SWFs?

Temasek: Vindication of its big bet on shale gas?

In Energy, Temasek on 16/06/2010 at 5:23 am

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.

DBS FTs: balls-up on top of cock-up?

In Banks, Corporate governance, Temasek on 15/06/2010 at 5:53 am

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?

http://atans1.wordpress.com/2010/05/26/dbs-fts-goofed-again/

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

http://atans1.wordpress.com/2010/05/14/dbs-fts-balls-up-contd/

SWFs: S’pore v Korea

In GIC, Temasek on 05/06/2010 at 5:16 am

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

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