atans1

Govt sees StanChart as risky?/ LKY’s 30-year investments revisited

In China, Hong Kong, Temasek on 28/04/2015 at 4:42 am

The Hong Kong Monetary Authority says that it “takes a positive attitude should HSBC consider relocating its headquarters back to Hong Kong”, where it is the largest bank.

HSBC WEIGHS MOVE FROM LONDON HSBC was established in Hong Kong 150 years ago and moved its headquarters to London in 1993. Now it is considering a return trip. Citing changes in regulation, HSBC says it will study whether to relocate its headquarters out of London, reports Chad Bray in DealBook.

A big part of the issue is Britain’s bank levy, which was instituted in 2010 to help pay for the government’s financial crisis bailouts. While all banks operating in Britain pay the tax, Mr. Bray writes that “The levy hits British-based banks particularly hard, however, as they are taxed on their global balance sheets.” HSBC’s announcement could become a political issue as Britain nears a general election on May 7.

(NYT’s Dealbook)

Hongkong Bank is a HK quitter. It moved to UK in 1993, juz before PRC regained HK in 1997. But all is forgiven.

Both HK have S’pore have similar sized economies (about US$300bn in GDP).

HK is willing to be lender-of-last-resort to HSBC a bank with US$2,6 trillion in assets, despite HSBC being almost 9 times bigger than HK’s GDP.

Yet the S’pore authorities, it’s clear from hints in the FT, are unwilling to have StanChart HQed here (only 1.1 trillion in assets), despite Temasek being the largest single shareholder (which will benefit from reduced tax: HSBC shares were up 6% in HK yesterday), and despite many of StanChart’s operations being run from here.

The PAP administration is afraid of another of Temasek’s investments blowing up? After all StanChart is not as safe as our local banks: https://atans1.wordpress.com/2015/03/25/stanchart-not-as-solid-as-local-banks/

It also has weaker capital ratios than HSBC and the big US banks. So weak that the new CEO is expected to call for yet another massive rights issue.

Remember LKY and his bank investments that are forever? OK 30 yrs leh) Even longer than Buffett’s investments, he once said

In 2007/2008, our SWFs’ bot into UBS (GIC), Citi (GIC) and Merrill Lynch (Temasek) in a big way that ST characterised then as showing S’pore was a tua kee investor.

We lost serious money in two of the 30-yr investments by 2009.

— Estimate of Temasek’s realised losses on ML and Barclays:

https://atans1.wordpress.com/2010/08/04/swee-say-said-that-gd-temasek-lost-billions/

— Estimate of GIC’s loss on UBS as at 2011:

https://atans1.wordpress.com/2011/07/26/gic-not-reported-in-st-cna-or-today/

(BTW, Temasek’s 2012 purchase of Credit Suisse mandatory bonds:

https://atans1.wordpress.com/2012/07/22/third-time-lucky-temasek/)

 

 

 

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  1. you really have a bone to pick against stand chart huh. haha.

    from my vague recollection, Temasek tried to increase its stake in SCB beyond 20% before, and HKMA threaten to remove SCB’s ability to print HKD notes for USD dollarswap.

    I believe this strategic ability of the bank to print is more relevant to the thinking behind not wanting to relocation SCB HQ to SG ( alongside not wanting to diminish its brand value to a perceived as an Asian franchise ) With some luck, shrewd marketing and good steering, SCB has a change to be an international bank with a global franchise given the history and legacy colonial perception due to its London listing. ( and owned by Singapore…. good for us )

    BOAML, I say tough luck, you can’t win them all. Selling at the bottom was a booboo, valiant attempt though trying to catch a falling knife. Beats buying at the top any day. Wouldn’t look like a patsy if you hear SG people today moving to US for international experience coming from a position of strength as a result of a successful Temasek strategic ownership of BOAML instead of lottery grovelling at American cultural dominance in order to get US experience.

    As for UBS, financial paper losses are small if you consider the knowledge, skill and hiring spinoffs, global work opportunities for current and successful generation of aspiration private sector driven SG graduates. Got to think a little bigger dude. Paper gains are small comfort if your roots are generally perceived as culturally inferior by any international party you meet.

    The intangible edge lies in walking into an organisation, and people pay you to join them because they perceive you to be superior.

    Not like Jho’s way of paying into celebrity, or the dilemma SG peeps based overseas face, who generally get slighted and treated like betas at work by their western colleagues never able to rise above a glass ceiling or employed for “diversity” reasons, yet coming back to SG showing a strong front, unable to say their overseas working experience was mediocre else their sufferings would have been a waste.

    • Valiance at catching falling knives and cutting at the bottom is typical of daft retail investors and only a hypocritical meritocracy will continue employing and paying $millions to those responsible for the fiasco.

      Instead of “grovelling at American cultural dominance” we are throwing $$$billions to them to show the world the prowess of our political masters?

      • well. typically when you try to amass a strategic stake in a global corporation. you have to throw billions. Ask Warren Buffet.

        Eh. Pls, we are throwing billions to buy UBS, BoAML during GFC. Not doing a dubious JV with unknown unlisted PetroSaudi in calm waters.

        And catching falling knives is what all astute big investors have to do, execution shrewdness and some luck is what determines success with a risk of failure ( retail don’t even count as influence in the large scheme of things. good for animal spirits to push up the marginal equity PE ratio thats about it, institutional ownership is what drives capital values .. which means deploying billions )

        I am saying, all these investments grouses are generated by looking at the results… which is easy. Hindsight is 20/20. If they came out well… no grouses right ?

        However at each intervening moment during the crisis, I will go as far to wager that many investment professionals who believe themselves to be smart and are accepted as smart would have found it hard to prove these decisions as bad. In fact they will judge these decisions in the moment as astute, and probabilistically successful.

        As for the ” hypocritical meritocracy will continue employing and paying $millions to those responsible for the fiasco ”
        = hypocritical meritocracy … please elaborate.

        = paying millions, well rather pay them millions and crucify them if they steal $1 ( because they have the potential to accrue $bn ) than to pay them what they lay man perceives as fair only for that same lay man to find it acceptable 20 years down the road that M1, SingTel is privatised because we didn’t pay them enough in the preceding 20.

        =as for continue employment…. well the absence of a resignation could also mean there is an inadequate ready list of substitutes ( who possess a better combination of skill, loyalty, temperament with the goal for the greater good of singapore ) I am saying that is could also be because that our genetic stock is lacking. a lot of keyboard warriors definitely… but in the grand scheme of things. pretty average resumes and achievements.

  2. The threat to leave the UK domicile was a great ploy to head off shareholders’ anger at Stuart Gulliver at the AGM. I doubt anything will come from it – HSBC is bellyaching at the banking surcharge levied by the government but the HSBC got massive tax savings from being domiciled in UK – think of all those “head office” charges assigned from low tax HK and SG to high tax UK.

    HKMA should be careful what it wishes for. It does not have sufficient tools to act as a lender of last resort, ditto MAS. Then if the shit hit the fan, we are talking of recapitalization by the HK government. During the GFC, have faced enough grumbling central bankers and regulators to know how difficult this can be. Besides, how do the Hongkies feel about bailing out such a huge bank for losses incurred elsewhere?

    Ditto SG with Stanchart. But there is an additional point – will Stanchart or any of these angmo tuakee banks domicile in SG if it has to comply with Tier 1 common equity and total capital adequacy ratios that are at least 30% higher than Basel 3 requirements? WITHOUT the breadth of retail banking to offset the cost of capital, their return in equity will be crushed, No way.

  3. I imagine for your scenario, if the shit hits the fan in HK…. HKMA might be the symbolic bailout authority, however in truth, just ceding control to PBOC.

    The HKers can’t even get right building apartments for decent living despite their decades of peace and prosperity…. I doubt they have any capability to bail out banks.

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