Archive for the ‘GIC’ Category

StanChart: Did you know?/ Glencore: Sinking fast

In Banks, China, Commodities, GIC, Temasek on 29/09/2015 at 1:06 pm

It was reported last week in the FT that Standard Chartered awarded Bill Winters, its CEO, shares worth more than 6 million pounds, or about $9 million, to compensate the bank’s new CEO for income he forfeited by leaving the hedge fund he founded. The upfront payment comes as the shares have hit new six-year lows.

Meanwhile GIC must be ruing not selling out of Glencore because on Monday in London

Shares in commodity giant Glencore plunged 30% after analysts raised fears about lower metal prices.

The company’s shares dropped to a new record low of 69p on Monday, helping push the FTSE 100 down 2%.

Analysts warned slumping metal prices could leave Glencore shares almost worthless because of its heavy debts.

Why did everything go wrong for Glencore? 

Whatever both StanChart and Glencore are suffering from China’s slowdown. And HoHOHO is still betting big on China (see previous story)?

HoHoHo: Temasek & GIC China plays

In Banks, China, Commodities, Emerging markets, GIC, Temasek on 14/09/2015 at 11:03 am

Reason for Glencore (GIC) and StanChart (HoHoHo back at work at Temasek soon) on the chart


Even small changes in demand from China’s vast economy can have a knock-on effect on prices.

As Glencore has found out to its cost.


FT reports that according to Nomura, half of StanChart’s Asian revenue in the first half of 2015. More

NYT Dealbook last Tuesday.

MORE SIGNS OF A SHARPER SLOWDOWN IN CHINA Once the world’s workshop, China’s exports are facing their most protracted declines since the global financial crisis, Neil Gough writes in The New York Times. China’s trade slump deepened in August – an indication of a sharper industrial slowdown at home and weaker demand from overseas. Exports fell 5.5 percent in August and 1.4 percent in dollar terms in the first eight months of the year.

The country’s manufacturing sector is losing competitiveness as labor costs rise and the renminbi remains relatively strong despite its devaluation, making Chinese goods more expensive for foreign buyers.

Imports are falling even more steeply. They fell for the 10th month in a row in August, recording a drop of 14 percent by value. Economists blame the rout in commodity prices, but imports have fallen in volume too. The falling imports of industrial raw materials point to weakening domestic demand, driven by a slump in manufacturing and new housing construction.

The weak trade data weighed on markets, with Japan’s main index, the Nikkei 225, closing 2.4 percent lower. In Shanghai, stocks initially fell when the trade figures were released, but heavy buying in the afternoon set off a rally. Shares closed 2.9 percent higher – a pattern seen often in recent weeks, as China’s government appears to continue its efforts to support the slumping stock markets.

China’s leadership made the surprise decision last month to devalue the currency by about 3 percent, the renminbi’s sharpest drop in two decades. But the central bank has since intervened in the markets on a massive scale, fighting pressure to weaken the currency further by selling dollars and buying renminbi.

As a result, China is burning through foreign exchange reserves at the fastest pace yet. Reserves fell by nearly $100 billion in August alone, though they are still huge at $3.56 trillion.

Still, analysts say that the recent devaluation was most likely too modest to give China’s exports much of a boost, and that the exchange rate is still stronger than China’s slowing economic growth would otherwise support.

Glencore: Great GIC idea in ’09, ’11 but in ’15?

In Commodities, GIC on 13/08/2015 at 1:35 pm

How do you make a £2bn fortune from commodities? Answer: start with a £6bn fortune.

Ivan Glasenberg, chief executive of Glencore, won’t be laughing. Those numbers are the value of his shareholding in the mining and commodity-trading company at flotation in 2011 and now. Yes, Glencore’s share price really has fallen by two-thirds, from 530p to 180p, since it came to market with a fanfare. Among London’s big miners, only Anglo-American has done worse.

This week alone the fall has been 10% as the China-inspired rout has run through commodity markets and mining stocks. Glencore is being whacked harder than the likes of BHP Billiton and Rio Tinto for a simple reason – relative to earnings, it has a lot more debt.

At the IPO in April 2011, GIC took  US$400m worth of shares, the second largest stake. The fund had already invested in Glencore through a convertible bond issued in 2009. At IPO time GIC was way ahead given that since the IPO had a market cap of US$62bn, it made a killing on its 2009 investment.

Update on @0August :

Glencore data

US marshalls target Harry’s and Ho’s banks

In GIC, Temasek on 08/06/2015 at 1:36 pm

Citi and UBS get fined big time by US. GIC has stakes in both and both are Harry’s 30-yr banks.

Ho Ho Ho. Lucky Temasek sold out of BoA as BoA is really big time criminal.

Chart: Bank fines with US regulators

And then there is StanChart that rolled over when a “rogue” regulator fined it once, and then another time for good measure

What Citi and UBS pleaded guilty to

In Banks, GIC on 26/05/2015 at 1:12 pm

Below is a summary of what Citi and UBS (Harry’s “forever” investments) pleaded guilty to from NYT’s Dealbook

HEAVY FINES FOR FOREIGN EXCHANGE COLLUSION At big banks, foreign exchange trading seemed like the ideal business – relatively low risk for solid revenues. But “what seemed like the perfect business turned out to be the perfect breeding ground for crime,” Michael Corkery and Ben Protess write in DealBook. Citigroup, JPMorgan Chase, Barclays and Royal Bank of Scotland pleaded guilty to a series of federal crimes over a scheme to manipulate the value of the world’s currencies, the Justice Department said Wednesday. A fifth bank, UBS, was also accused of foreign currency manipulation but was not criminally charged because it had alerted the Justice Department to possible misconduct. However, the accusations cost the bank an earlier nonprosecution agreement related to the manipulation of the London Interbank Offered Rate, or Libor.

Prosecutors said traders at the five banks colluded from at least 2007 to 2013. “To carry out the scheme, one trader would typically build a huge position in a currency, then unload it at a crucial moment, hoping to move prices. Traders at the other banks would play along, coordinating their actions in online chat rooms,” Mr. Corkery and Mr. Protess write. The foreign exchange business may have been particularly susceptible to manipulation because it can be less profitable than other forms of trading, which increases the pressure for the traders to look for alternative ways to pad their returns, analysts said. Also, no one government agency is responsible for policing the currency market, creating a regulatory void.

The five banks, which also struck civil settlements with the Federal Reserve, the Commodity Futures Trading Commission, a British regulator and New York’s financial regulator, agreed to pay $5.6 billion in penalties. That is in addition to the $4.25 billion that some of these banks agreed to pay in November to many regulators. Together, the amount nearly equalsthe foreign exchange revenue generated at 10 of the world’s largest banks last year, which was $11.6 billion, according to Coalition, a financial analytics provider.

WILL PENALTIES CHANGE BANKS’ BEHAVIOR? What’s notable in the currency manipulation case is the ethos articulated by the traders involved. They called themselves “the mafia” and “the cartel,” and one Barclays trader wrote in an online chat room, “If you aint cheating, you aint trying.” In the White Collar Watch column, Peter J. Henning asks whether the guilty pleas and penalties will make a difference in how banks do business, noting that “even as penalty after penalty is paid by big banks in various cases, it seems as though the same cast of corporate characters keeps reappearing.”

He notes that guilty pleas from the big banks are “noticeably tougher” than the enforcement actions of the past, when violations drew only deferred or nonprosecution agreements. Yet the act of pleading guilty doesn’t carry the same stigma as it did in the past, Mr. Henning writes, because the government has tried to keep a guilty plea from hindering a bank’s operations. The Justice Department has also been demanding the identities of the employees behind the violations, but it’s unclear whether it will actually prosecute those people. “To change corporate culture and prevent violations from happening in the future, prosecutors may have to go beyond just demanding cooperation and threatening ever larger fines,” Mr. Henning contends.

Two of LKY’s “forever” banks are criminals

In Banks, GIC on 25/05/2015 at 1:02 pm

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).

UBS and Citi are still owned by GIC are now big time crooks. Recently, JP Morgan, Barclays, Citigroup and Royal Bank of Scotland – pleaded guilty to criminal charges in the US relating to the rigging of currency markets.

The four, and Switzerland’s UBS, which pleaded guilty to a different charge, agreed to pay $5.7bn (£3.6bn) in fines.


GIC, Temasek tie up with Superman? Roy will have shumething to say

In GIC, Telecoms, Temasek on 05/02/2015 at 2:09 pm

Sovereign Wealth Funds Said to Be in Talks to Back O2 Deal — Some of the world’s biggest sovereign wealth funds, including the China Investment Corporation, Singapore’s Temasek and G.I.C. and one of Qatar’s big government-sponsored vehicles, are said to be in talks to provide financial backing for Hutchison Whampoa’s $15 billion acquisition of Telefonica’s British mobile business, according to a report in the Telegraph that cited unidentified sources.

GIC: Rubbing salt into S’poreans’ CPF woes

In CPF, Economy, GIC on 03/08/2014 at 4:42 am

This is how our constructive, nation-building BT reported how GIC is adding insult to injury:

AMID a gloomier outlook for fund managers globally, GIC has racked up annualised real returns of 4.1 per cent over the past 20 years to end-March this year, up from 4 per cent as at end-March last year. This return – above global inflation – was underpinned by a strong recovery in global financial markets, said the Singapore sovereign wealth fund.

Waz the point of this inflation-beating return when the 2.5% CPF rate is below S’pore’s inflation rate? Remember that until recently, we were told the 2.5% rate was justified given that inflation was oneish?

In late July after the June inflation numbers were released which showed core inflation slowed for a second straight month to 2.1 per cent after May’s 2.2%, but a drop to below 2% will be unlikely this year, OCBC economist Selena Ling told MediaCorp..

CIMB economist Song Seng Wun agreed: “The domestic pressure on core inflation hasn’t disappeared. In fact, the pass-through of wage costs to consumer prices has so far been slower than expected, but may become more visible as the economy further recovers.”Core inflation, which excludes accommodation and private road transport costs, is regardeded as a reflection of the wage cost pressure, and the MAS and the MTI retain their 2 to 3%  forecast given the tight labour market. Govt’s way of saying, “You want less FTs, we give you slower growth of FTs and higher inflation.”?The official forecast for all-items inflation is being kept at 1.5 to 2.5%, as the Government expects overall prices to ease in the second half due to lower imputed rentals and car prices, with Certificate of Entitlement quotas expected to rise more than expected*.

Especially as our CPF monies do find their way into the pool of funds managed by GIC. Not that this s any secret exposed by Roy Ngerng. I blogged about this in 2009. And I think TRE reproduced it then.

And one LKY spoke in 2000 or 20001 at a GIC anniversary do about how the CPF monies were converted into a special govt bond and the proceeds flowed into GIC after being mixed with govt surpluses in the Consolidated Fund.
*Update at 5ooam: Extract from BT of 24 July on inflation
The government has cut its 2014 inflation forecast amid lower car prices and housing costs expected for the second half of the year: it now sees headline inflation coming in at the lower half of its 1.5-2.5 per cent forecast range.

But with domestic cost pressures remaining the primary source of inflation, the government reiterated that core inflation (which strips out accommodation and private road transport costs) will stay elevated at 2-3 per cent in 2014.

The impact of rising consumer prices on households varied across different income groups in the first half of this year. Worst hit were the bottom 20 per cent of households: their larger expenditure shares on food and healthcare costs meant they experienced a higher inflation rate (excluding imputed rentals on owner-occupied accommodation) at 2 per cent, compared to the middle 60 per cent income group and the richest fifth of households (both at 1.7 per cent).

CIMB and DBS economists agreed that much of the increase in food and healthcare costs was the result of ongoing restructuring efforts, where a tight labour market has pushed costs (and therefore prices) up.

Said DBS’s Irvin Seah: “Restructuring is inflationary in nature, and it will affect everything. Even if we are unable to bring healthcare costs lower, we should try to moderate the pace of increase.”

According to a report released by the Department of Statistics (DOS) yesterday, Singapore households experienced a 1.7 per cent inflation rate in the first half of this year compared to the same period in 2013. This was lower than the 1.9 per cent rise seen in the preceding six months.

Excluding imputed rentals on owner-occupied accommodation, the consumer price index (CPI) went up by 1.7 per cent in H1 2014 – slightly higher than the increase of 1.5 per cent in the second half of 2013.

As for the second half of this year, the government expects headline inflation to ease, due to lower car prices and accommodation costs.

GIC, Temasek laughing all the way from Alibaba’s cave

In Financial competency, GIC, Private Equity, Temasek on 10/06/2014 at 4:47 am
FT reported a few moons ago on how Alibaba is likely to be valued in a coming US IPO:
Would-be buyers of Alibaba’s unlisted shares and convertible bonds have recently been making offers that value the group at $120bn-$150bn*, according to bondholders and others involved in the market …

That is a sharp contrast with 2012, when Alibaba issued the $1.6bn convertible bond to a small group of investors including Singapore’s Temasek and GIC.

At the time, Alibaba was valued at less than $40bn, two people with direct knowledge of the situation said. Under the terms of the deal, the bond will convert into equity upon completion of an IPO.

($= US$)

Temasek haters like Chris Balding and Heart Truths must be feeling sick. The bonds are worth 3 times the price that Temasek, GIC paid for them. Even at the low end valuation valuation of US$80bn, the bonds would have doubled in value. Keep on cursing Heart Truths and Chris Balding (and TRE posters). GIC, Temasek are like Sith Lords, they do well when you keep cursing them. LOL

Never mind, these rabid haters can bitch about the failure of an IPO where Temasek among other shareholders were trying to flip less than a yr after they went in. Investors tot they were too piggy in a pig farming IPO.

*Another view: Alibaba’s valuation, which a Breakingviews calculator estimates at $113 billion


Temasek’s Lim talks rubbish/ Olam helps African farmers

In Africa, Commodities, GIC, Political governance, Temasek on 03/04/2014 at 4:55 am

Temasek’s chairman Lim Boon Heng (the chap who cried when voting for casinos) was quoted by BT on 31 March as saying, “Coming from a little island nation with no natural resources except for some granite rocks, we are not a sovereign wealth fund in the normal sense of the term,” he said at a reception to mark the opening of Temasek’s new European office in London last Friday.

“Instead, we invest capital accumulated from generations of hard work and commitment by everyone in Temasek and the Temasek portfolio companies,” said Mr Lim in a speech at the Millennium Mayfair Hotel.

Well, I could reasonably say that he is talking rot*. It could be reasonably argued that part or most of money saved (via budget surpluses) could have been be more productively spent on making life better for S’poreans. It could have been spent on

— more hospital beds (,

— better public transport (Using back-of-the envelope calculations and figures in annual reports, since it was listed SMRT (over a decade ago) has paid S$562.79m in dividends to Temasek, and ComfortDelgro has paid the S’pore Labour Foundation (a statutory board affiliated to the NTUC) dividends of  S$150.46m since 2003 (Comfort and Delgro merged in 2003, and SLF had a stake in Comfort). The amount that ended up with the government was S$713.25m, with SMRT contributing 79%. But ComfortDelgro is likely be the main beneficiary of the S$1.1bn bus plan) (Italics added at 6.55am),

— low cost public housing (remember Mah saying that lowering the cost of land cheaper was raiding the reserves Link also describes how budget surpluses and the reserves are linked),

— welfare for the elderly and needy. and

— education.

The list for the productive use of govt revenue rather than to play roulette or baccarat (OK, OK invest) can go on and on.


Leading local economists (not juz a wannabe opposition politican) have made this point about better uses of govt money than squirreling it away for a rainy day that never comes**. They juz don’t get reported by our constructive, nation-building media.

But maybe the govt is changing its attitude and Temasek is leading the way?

Olam is into sustainable, ecofriendly agriculture.

Sor and farmers from 36 communities in the Juabeso/Bia district are part of a project to produce climate-smart cocoa, claimed to the the world’s first. The $1m, three-year pilot collaboration between Rainforest Alliance (RA), an environmental organization, and Olam International, agricultural company, offers financial incentive to the farmers.

In the wild, cocoa trees grow under taller trees, which protect them from the scorching sun. But in Ghana as in neighbouring Ivory Coast, which together account for more than half the global supply, cocoa is grown as a monoculture.

“I had a lot of trees on my farm, but I cut and burned them. I thought they brought diseases, were a nuisance and took the place of cocoa,” says the mother of four, who owns a 4-acre farm in Eteso.  “I didn’t know about the importance of shade trees until I joined the group.”


Three cheers for Olam and Temasek for helping African farmers. Next stop S’pore SMEs?

Maybe Temasek is experimenting in Africa. Next an investment in a S’pore based co that helps S’poreans? Charity begins at home.

BTW, nice to see that GIC opened an office in Brazil. About time as Latin America is becoming unfashionable among the ang mohs.

GIC opened an office yesterday in Brazil, as it looks for more investment opportunities in Latin America.

The new office – its 10th globally – will focus on areas such as real estate, healthcare, financial and business services, and natural resources and infrastructure.

“Our presence in Brazil will enable our partners to engage early and interact closely with the GIC team, which is very beneficial for complex and sizeable investments,” said group chief investment officer Lim Chow Kiat.

“We believe our partners will gain from having access to GIC’s global network of business contacts and market insights. Although emerging markets remain volatile, we are confident of the long-term Latin America growth story.” (Yesterday’s BT).

These countries need capital, now that the ang mohs no longer like the area. China is investing there, BTW.


*One of these days I’ll blog why ever since Devan Nai, Lim Chee Onn and Ong Teng Cheonf, we’ve had clowns as NTUC leaders. Lim may have been a failure as NTUC leader (Devan Nair fixed him), he he turned out to be a gd for Keppel, for which I’m grateful.)

**I hope thyose who think the world of Ong Teng Cheong realise that he wanted to look away even the returns from reserves away from the masses. Lee Hsien Loong and co got their way on using some of the returns on govt spending.

Norway’s SWF: transparency & performance not exclusive

In Corporate governance, Financial competency, GIC, Temasek on 15/07/2013 at 5:09 am

From FT

Transparent, yet doing well.So large it owns an average 1.25% of every listed company in the world, or 2.5% of every European listed company.

Temasek, GIC and govt can learn from Norway? Pigs will fly first, I suspect.

Update two hrs after publication:

Unlike Temasek, it ain’t big on Chinese banks

Temasek owns big chunks in three out of four China’s major banks

– 2% of Bank of China

– 8% of China Construction Bank

8% of Industrial & Commercial Bank of China,

Temasek has accumulated more than [US]$17 billion of holdings in Beijing-based ICBC, China Construction Bank Corp. (939) and Bank of China Ltd. over the past two years, according to data compiled by Bloomberg. Global firms including Goldman Sachs and Bank of America Corp. have divested holdings as new capital rules known as Basel III make it more expensive to hold minority stakes in banks. (Bloomberg few days ago)


Temasek has stakes in three out of the four biggest Chinese banks. It therefore has stakes in the world’s largest, fifth and 9th largest banks. It doesn’t have a stake in Agriculutural Bank, the 10th largest.

MSM, less triumphalism when puffing up GIC, Temasek

In Financial competency, GIC, Media, Temasek on 09/04/2013 at 6:16 am

Pls remember what someone who manages more $ than GIC, Temasek says abt performance

Clearly the ability of the investor to adapt to the market’s “four seasons” should be proof enough that there was something more than luck involved? And if those four seasons span a number of bull/ bear cycles or even several decades, then a confirmation or coronation should take place shortly thereafter! First a market maven, then a wizard, and finally a King. Oh, to be a King.

 But let me admit something. There is not a Bond King or a Stock King or an Investor Sovereign alive that can claim title to a throne. All of us, even the old guys like Buffett, Soros, Fuss, yeah – me too, have cut our teeth during perhaps a most advantageous period of time, the most attractive epoch, that an investor could experience. Since the early 1970s when the dollar was released from gold and credit began its incredible, liquefying, total return journey to the present day, an investor that took marginal risk, levered it wisely and was conveniently sheltered from periodic bouts of deleveraging or asset withdrawals could, and in some cases, was rewarded with the crown of “greatness.” Perhaps, however, it was the epoch that made the man as opposed to the man that made the epoch.
PIMCO’s Bill Gross

Citi: Last dog in the race

In Banks, Corporate governance, GIC on 23/10/2012 at 5:15 am

And we own a big chunk of it still. ((((((

FT’s banking editor suggested that it could be split five ways: “into an equity and fixed-income trading entity; an advisory platform; a US retail bank network; a global trade finance shop; and an emerging markets retail bank.” [This para added at 6.07am on day of publication.]

GIC: News not reported by SPH, MediaCorp/ LionsXII

In Footie, GIC, Media, Private Equity on 04/10/2012 at 6:36 pm

GIC recently sold out of its investment in British Airports Authority

According to FT, the sellers recovered their investment and a little more: not a good deal. But these are difficult times.

Still trying to buy some assets, despite being turned down before at same price

On totally different issue, relax Young Lions. Playing winning football, not attractive football. Fans will forgive you if you play ugly and get into finals. And remember, other side has more to lose than you.

Update on Citi: New Citi, old Citi

In Banks, GIC on 02/09/2012 at 7:09 am

As GIC still has a loss position in Citi (though it has realised profits to offset the loss, unlike in UBS), tot I’d update readers

GIC: Buying while others selling

In GIC, India on 27/07/2012 at 6:44 am

Don’t worry, amounts only “peanuts”.

GIC increased its holding in Reliance Industries from 1.06% to 1.22% in the three-month period ended June 30, 2012 while other foreigners were selling.

“30-yr” GIC investment Citi almost junk

In Banks, GIC on 23/06/2012 at 9:25 am

15 major banks* (including another GIC investment UBS)  were hit with credit downgrades on Thursday that could do more damage to their profitability, credit worthiness and further unsettle equity markets.

The credit agency, Moody’s Investors Service, which warned banks in February that a downgrade was possible, cut the credit scores of banks to new lows to reflect new risks that the industry has encountered since the financial crisis.

Citigroup was among the hardest hit. After the downgrades, the bank stands barely above the minimum for an investment grade rating, a sign of the difficult business conditions it faces.

Banks have struggled to improve their profits against the backdrop of the European sovereign debt crisis, a weak American economy and new regulations. The downgrades may amplify their problems. With lower ratings, creditors could charge the banks more on their loans. Big clients may also move their business to less-risky companies, further affecting earnings.

Wonder if LKY, who made the 30-yr comment, has repented making the comment?


Citi bitches: Citi said in a statement that Moody’s approach “fails to recognize Citi’s transformation over the past several years,” adding that “Citi strongly disagrees with Moody’s analysis of the banking industry and firmly believes its downgrade of Citi is arbitrary and completely unwarranted.”

But more woes: Citigroup seen as vulnerable to emerging markets’ currency movements Charles Peabody, an analyst for Portales Partners, estimated on “Bloomberg Surveillance” that $3 billion to $5 billion of Citigroup’s book value was vulnerable to changes in the value of the Mexican peso and the Brazilian real

Good news: It claims it is boosting revenue at its corporate and investment banking unit in with rising fees from debt underwriting and cash management as initial public offerings shrink


*Bank of America, Citigroup Morgan Stanley, JPMorgan Chase, Goldman Sachs, Credit Suisse, Deutsche Bank, UBS, HSBC, Barclays, BNP Paribas, Crédit Agricole, Société Générale, Royal Bank of Canada, and Royal Bank of Scotland.

Trying to con GIC?

In Energy, GIC on 22/06/2012 at 2:53 pm

On 5 June 2012, Australia said it would delay environmental approval for a A$10 billion (US$9.72 billion) coal project proposed by India’s GVK Power & Infrastructure, a potential setback in the company’s bid to take advantage of India’s need for coal.

Well it was reported on 19 June that GVK Power and Infrastructure is seeking to raise US$500 million to US$600 million by selling a stake in its Singapore arm and is in talks with Government of Singapore Investment Corp for a potential deal, two sources with direct knowledge of the matter said.

The Indian developer of airports, power projects, roads and mines will sell a minority stake in GVK Coal Developers (Singapore) Pte Ltd, the sources said, adding that a deal may be a precursor to a Singapore listing of the unit that holds coal assets in said Australia.

Tricky buggers these Indians.

Role Reversal for Bank of America and Citigroup

In Banks, GIC, Temasek on 11/04/2012 at 7:22 pm

Going into the earnings season, these two big banks have reversed roles: Bank of America, which last year faced concerns about its health, has rallied this year, while Citigroup now confronts doubts.


For the record:

— Temasek dumped its stake in BoA in 2009 when hedgies were buying, losing, it is estimated US$4.6bn;

— GIC is now sitting on paper losses on its remaining stake in Citi (stake was profitable last July, see link below); and

— one LKY said in 2008 that these (and UBS, where GIC still has unrealised losses) were beyond long-term investments. There were 30-year investments.

Wall St’s finest after the collapse of Bear

In Banks, GIC on 19/03/2012 at 8:38 am

Citigroup’s down 82%

Citi cont’d

In Banks, Financial competency, GIC on 15/03/2012 at 11:40 am

Citigroup’s CEO Vikram Pandit said the bank still has capacity to return more capital to shareholders and will seek clearance for a “meaningful” payout after the Federal Reserve rejected an initial plan, the wires report. The Fed allowed f\JPMorgan Chase and Wells Fargo to increase their payouts.

Despite this failure to payout more to shareholders, Vikram S. Pandit could see a total of US$53 million in compensation for 2011, from his yearly pay combined with a multi-year retention package, Bloomberg News reports, citing filings and an analyst’s estimate. Could remind TOC and TRE readers or their usual writers of the transport and HDB ministers who “retired” after failing to anticipate the problems that increased FTs would cause in their portfolios and of “50-year flood” Yacoob who got moved to MICA after Orchard Rd was hit by two such floods in two months in 2010.

Related post:

Citi falls Fed test: one of only four that failed

In Banks, Financial competency, GIC on 14/03/2012 at 1:41 pm

Four US financial institutions, including Citigroup, have failed stress tests designed to show they could withstand a financial shock. The Federal Reserve said Citi, SunTrust, Ally Financial and MetLife failed to show they have enough capital to survive another serious downturn.

Citigroup is the third-largest US bank. The majority of the 19 tested passed.

All those tested are in a much stronger position than they were after the 2008 financial crisis, the Fed added.The Fed tested the banks’ ability to withstand a similar crisis that triggered a rise in unemployment to 13%, a 50% fall in share prices and a 21% drop in house prices. Their strength is assessed by the amount of “buffer” best-quality assets, known as Tier 1 capital, they would hold if such conditions occurred. The regulator said Citigroup had a Tier 1 capital ratio of 4.9%.

Reminder, GIC still has a substantial stake in Citi. SIGH.

Update at 6.15pm on 14 March 2012: Despite failing the test, Vikram S. Pandit, Citigroup’s chief executive, could see a total of US$53 million in compensation for 2011, from his yearly pay combined with a multi-year retention package, Bloomberg News reports, citing filings and an analyst’s estimate.

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.

(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.

GIC: A dog of an investment

In GIC, Private Equity on 24/02/2012 at 6:14 am

BAA made a loss as debt payments mount. Rising interest payments on BAA’s debts turned the operating profit of £572m into a pre-tax loss of £256m – a £60m improvement on its 2010 losses.

GIC is a one of three members of a consortium that won a bid for BAA, valuing it at £10.3bn in June 2006. The investment went almost immediately wrong. Fortunately, GIC’s initial stake stake was  a peanutty 5-10%. The exact %age has never been disclosed.

Still it is no surprise that Reuters reports that GIC  “is selling US$750 million of private equity and other funds it no longer wants to invest in, and will redeploy the money to other better-performing managers, according to sources familiar with the matter”.

To be fair,”sovereign wealth funds and pension funds are pruning their exposure to alterative assets such as private equity amid the economic downturn”. Taz the problem when one tries to be hip and sassy.

Citigroup: Its day is coming

In Banks, GIC on 12/01/2012 at 5:15 am

 UBS and Citigroup are stocks that the SDP, and KennethJ use to beat up GIC (and its then executive director) regularly

This explains why Citigroup might be the stock to own.

 Citi’s a strange creature. It’s dysfunctional. Its never missed a major financial crisis (loans to the developing world and US property loans in the late 1970s and 1980s; LBO loans in the late 1980s; dotcom stock recommendations in the late 1990s; and sub-prime mortgages recently). But at the operational level, it produces good managers who are in demand when it comes to running medium-sized banks in developing countries. The CEOs of DBS and OCBC were from Citi, as was  the CEO of RHB Babk.

UBS: What else can go wrong?

In Accounting, Banks, GIC on 27/10/2011 at 6:36 am

Readers will know by now that UBS, where GIC is a major long-term (and suffering)  investor, is planning to reduce the scale of its investment banking operations, the source of its on-going problems since 2007.

But they may not know “What they are trying to do has never been done before,” Christopher Wheeler, an analyst at Mediobanca, said. “They want to shrink the investment bank by choice, which means unwinding positions without loss and running down their books while keeping the morale among staff, and it’s unclear who’s running the shop.”

And don’t be fooled by its latest results. Despite being hit by a 1.85bn-franc loss from deals made by an alleged rogue trader, it just made  a better-than-expected third-quarter net profit of 1bn Swiss francs (US$1.1bn).

The loss was almost entirely offset by a 1.77bn-franc accounting gain that came from changes to the value of the bank’s own debt. One of these days, I’ll blog on the Alice-in-Wonderland accounting that allows this type of gain to materialise. According to the FT’s Lex, four-fifths of the US$16bn net profits  in the latest announced results of (BoA, Citi, JPMorgan, Morgan Stanley and Goldman Sachs came from using used the same accounting treatment of the banks’ own debts.

UBS: And GIC wasn’t consulted?

In Banks, Corporate governance, GIC on 28/09/2011 at 6:52 am

I don’t know what shocked me most.

I read in Monday’s Today that despite being the largest single shareholder in UBS (6.4%), GIC was not consulted on the management change when the CEO resigned. He resigned over differences in strategy and corporate governance issues.

Yesterday evening Reuters reported that “GIC supported former chief executive Oswald Gruebel’s strategic plan for the bank and believed he could have stayed on to manage it through the latest crisis, a source with direct knowledge of the matter said on Tuesday … GIC’s support of Mr Gruebel until the very end also shows that while his leaving may have satisfied some shareholders, it hardly reassured the Singapore fund, which owns 6.4 per cent of the bank.” (Sorry I don’t have the link as I got the report via BT Online.)

Given that GIC is the single largest shareholder and supported his plan, and the board was meeting in S’pore, GIC should have been consulted. Would any company where Warren Buffett is the single largest shareholder dare sack a CEO that had his backing? Unlikely.

Time for GIC to gain some respect by flexing its financial muscles. No more Ang Moh Tua Kee pls.

GIC: Smoke & mirrors

In Accounting, Corporate governance, GIC, Political governance on 27/09/2011 at 3:21 pm

No, this is not a rant abt GIC’s performance or how it misleads the public abt its performance. It’s about how its inability or unwillingness to communicate with us, the public, can be self-defeating, leading to more questions being asked, especially on why it keeps relying on spin rather than facts, as illustrated by this media statement from GIC.

In a statement to the media last week, the Ministry of Finance said, How well GIC performs is not a secret. Its mandate is to preserve and enhance the international purchasing power of the reserves over the long term. Hence, it publishes its 20-year annualised real rate of return.

GIC also reports its returns over five- and 10-year periods as intermediate measures of its performance.

 GIC’s Performance as per annual report

Period Government’s nominal rates of return in US$ for period ended 31 March 2011 (%) 
5-Year 6.3
10-Year 7.4
20-Year 7.2

Well its performance might be as well be secret.

The problem is that these performance numbers raise questions on their methodolgy, to which answers are not available. I will only raise one issue, but this one issue will take acres of space. TOC has raised other less technical issues.

My grumble is that there is no disclosure on whether the functional currency is US$ or S$. By “functional currency”, an accountant means the currency in which the accouts are prepared. We only know that the returns are presented in US$, the presentational currency. This does not imply that the functional currency is US$.

If the accounting of the funds under mgt are done in S$, the performance results would have included the exchange loss arising from the US$ depreciation against the S$. So if its functional currency is S$, but its presentation currency is US$, then all exchange losses arising from US$ depreciation against the S$ will have been taken into account.

If however if the  functional currency is US$, then its US$ denominated assets and US$ investment income will not be impacted by US$/S$ movements. And any analysis would have to take US$ depreciation into account.

The differences can be great. (Please click “Read more” to read the article in full, if you are reading from the Home page. There is a necessarily long-winded example to illustrate what I’m trying to say.)    Read the rest of this entry »

GIC has internal communication problems?

In Corporate governance, GIC on 21/09/2011 at 8:25 am

I am pleased to read in today’s FT that GIC has in a statement (can’t find it to link to) expressed its concern to UBS abt the latest loss of US$2.3bn.

At least, it is concerned it bought us 6.4% in a dog with fleas.

Why these comments by me?

Yesterday I was appalled by this media statement to Today. GIC came across as saying, “So what if GIC lost money in UBS, it made money elsewhere, and that’s the important thing.” This was hedgie gunslinger talk, not that of a responsible fund manager.

True. performance should be judged on the performance of the entire portfolio,  not its individual holdings. But

– where a bigger than normal bet is made (GIC usually buys less than 5% of an investee),

– in a special deal for GIC alone,

– where it trumpeted very loudly its prowess at the time when the deal was made,

such such public insouciance by Jennifer Lewis Head, Corporate Affairs and Communications, is unacceptable.  Especially as GIC manages our money. (BTW, yes, she helped Tony Tan in the debacle of a campaign in her personal capacity.)

So I am glad to read that GIC is concerned abt its investment in UBS.

UBS: Why GIC may have to take a loss

In Banks, GIC on 20/09/2011 at 7:31 am

The investment bank of UBS “now looks as likely to die as it is to live,” writes Felix Salmon of Reuters. Selling or spinning off the unit don’t look like great options in the current environment, he says.

So there goes GIC thesis of a unique franchise combining wealth mgt and investment banking.

Remember, GIC has a 6.4% interest in this dog with fleas and GIC is down around S$10bn as of Thursday last week. Since then the loss has reduced to S$9.75bn. Even Mrs Goh Chok Tong would not call this sum “peanuts”.

What’s yr advice on UBS, TT?

In Banks, GIC on 16/09/2011 at 7:31 am

GIC’s big loss-making investment in UBS happened on Tony Tan’s watch at GIC.

Given the latest problem at UBS, a US$2bn “unauthorized” loss (anyone ever heard of an “authorized” loss?”, and Tony Tan’s boasting of his expertise, PM should ask him for advice on what to do with this long-term investment?

Too bad, the president can only give advice and be a security guard. In investment management and investment banking, there is a school of thought that believes that those who created the shit, should clean up the mess themselves.

Update at 4.15pm on 16 September 2011

Local paper reported that the book loss on GIC’s 6.4% in UBS is S$10bn based on yesterday’s closing price of UBS shares.

Hedgie beats GIC in court case

In GIC on 11/08/2011 at 6:51 am

Paulson & Co, the US hedge fund, has won a US court victory against GIC over control of a group of luxury hotels that brings it closer to making potential windfall profits.

GIC has been trying to win control of the hotels from a group led by Paulson & Co since early this year. These hotels were originally part of the holdings of troubled Morgan Stanley real estate funds –

The FT reports, In a little noticed judgment at the end of June, the court extended for another four months the Paulson group’s exclusive rights to file a bankruptcy plan.

GIC had argued that the Paulson group would manipulate the bankruptcy process for its own gain. According to court documents, GIC said the Paulson group was delaying resolution to enable it to “bet on a significant upswing in the commercial real estate market”.

Note SWFs are reluctant to court the publicity that goes with litigation.

Note this hedgie made billions buying BoA when Temask was selling its “30-yr” investment.

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.

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.

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.”

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.


GIC: Loss of S$5.2bn on combined UBS and Citi investments

In GIC on 26/07/2011 at 6:44 pm

(Note that on 27 July 2011 at 8.20am, I revised the article)

Using BT’s numbers that appeared in BT today, I calculated that GIC has a book loss of S$8.4bn on UBS, a profit of S$1.9bn on Citi and a paper profit of S$1.3bn. So this adventure in distress investing has not paid off yet. The net book loss is S$5.2bn.

GIC owns 245.48 million UBS shares, or a stake of 6.41 per cent in the bank, UBS’s latest annual report shows. That stake would be worth some 3.41 billion francs, at UBS’s share price of 13.88 francs at 9.30pm Singapore time yesterday. Even after including the 1.98 billion in coupon payments that GIC received in the first two years of its investment in UBS, its paper loss is about 5.6 billion francs*, or 51 per cent of the original 11 billion francs.

By contrast, its current stake in Citi is showing a large paper gain.

After selling half its original stake in Citi for a profit of US$1.6 billion** in September 2009, GIC still owns 3.86 per cent of the bank’s ordinary equity – or about 112.095 million shares.

The average cost of those shares was US$29.50 each – after adjusting for a reverse split of Citi shares in May that merged every 10 of its shares into one share – based on information provided by GIC in September 2009.

At yesterday’s opening price of US$39.69 for Citi shares in New York, the shares would be worth about US$4.45 billion, compared to the US$3.31 billion cost of acquiring them, giving GIC a paper profit of US$1.14 billion***, or some 34 per cent.

(*S$8.4bn, **S$1.9bn, ***S$1.3bn)

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.

GIC has a winner with Glencore

In GIC on 15/04/2011 at 7:03 am

In Dec 2009, GIC and a few other investors (including BlackRock, Fidelity and a Rothschild) invested US$2.3bn in the convertible bonds of a then private Glencore. The convertibles put a value of US$35bn on Glencore, a trading co with a 34.5% in mining co ,Xstrata

Analysts now put the value of soon to be listed Glencore at between US$55-70bn.

If Glencore lists at the expected US$60bn, then the US42.3bn issue of convertible bonds will be worth US$4.3bn in Glencore shares.

Nice work GIC.

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,


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.

GIC: Hawaii, Miami here we come

In GIC on 15/02/2011 at 3:17 pm

GIC has offered to pay Us$1.5 bn for five resorts reports Bloomberg. Among the resorts: the Grand Wailea Resort Hotel & Spa in Maui, Hawaii, and the Doral Golf Resort & Spa in Miami.

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.


Backgrounder: S’pore Inc has big bets on China

Citibank: What our MSM doesn’t tell us

In Banks, GIC on 20/01/2011 at 5:35 am

Our MSM focused on the fact that last yr was Citi’s first profitable yr since 2007. But it didn’t say much abt fact that Citi’s latest quarterly profits disappointed the mkt because they are due to a tax credit and a transfer from its reserves, nothing to do improving operations.

Could it be because GIC stills owns a lot of it? And with a GE coming, the “constructive, nation building” media don’t want to remind us that returns for shareholders are not going to be great for some time?

S’pore Inc: One up on Korea Inc

In GIC, Temasek on 15/01/2011 at 5:32 am

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.

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 »

S’pore Inc:”Something this stupid generally requires teamwork”

In Corporate governance, GIC, S'pore Inc, Temasek on 01/12/2010 at 5:48 am

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 »

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, 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 . 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]

How we fund our SWFs

In CPF, GIC, S'pore Inc, Temasek on 02/11/2010 at 5:42 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.

Our SWFs juz lost S’pore S$685million

In GIC, Temasek on 22/10/2010 at 10:06 am

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.

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?

GIC’s dog investment will be less profitable

In Banks, GIC on 05/10/2010 at 5:54 am

Switzerland has proposed new rules that will make UBS less profitable. As GIC is 45% underwater on its UBS investment, this means it may take longer for GIC to breakeven on this dog with fleas. MM’s talk of 30 years may be an understatement. And he was talking of profit not breakeven.

And GIC may have to invest more in UBS if it decides that it wants to maintain its present holding. These rules means UBS will have to raise capital.

Finance 101: the more capital is required to hold, the less funds it has to make money because capital has to be invested in very safe assets, normally government bonds of the supervising country.

UBS and Credit Suisse will have to accumulate billions of francs in extra capital under proposals from a Swiss expert group on the role of banks deemed “too big to fail.”

The recommendations will oblige Switzerland’s two top banks to maintain supplementary national capital standards far in excess of the Basel III rules agreed by international regulators last month. note

The proposals will oblige the banks to hold total capital equivalent to 19 per cent of the risk weighted assets on their balance sheets, based on their current figures.

Under the proposals, the first 10 per cent of capital will have to be strictly defined “common equity” – meaning capital of the highest quality. The requirement is three percentage points more than the 7 per cent proposed under Basel III for banks to pay bonuses. FT reports.

Related posts

The second link talks abt GIC’s and Temasek’s pre -crisis strategy of investing in efficient (in hindsight thinly capitalised) banks.

GIC: Waz the point?

In GIC on 04/10/2010 at 5:14 am

My dig at GIC and VB got a response that implied I didn’t know the theory about judging results by the entire portfolio

If GIC and our “constructive”, “nation building” media treat us S’poreans as morons, as this piece (albeit too rhetorical for my taste) points out, I don’t see why I should try to analyse  its portfolio performance. Disrespect begets disrespect.

The GIC report doesn’t give the data to make  a meaningful analysis. Now I am not asking for  more transparency, there could be gd national security grounds for being opaque. True Norway’s SWF is very transparent but Norway doesn’t have our neighbours: one with a record of aggression against its citizens, and other countries, and two jealous abt S’pore’s performance.

But MSM, GIC stop spinning that GIC’s performance can be analysed from the data provided.

BTW for the record, in January this year, NYT reported “The Government of Singapore Investment Corporation, which made a $575 million secondary loan, and invested as much as $200 million in equity, stands to lose all of that,” in an investment in NY City.

Translated into S$, this is juz over S$1bn: can buy lots of abalone, sea cucumber and other goodies d for social welfare cases; or fund two-and-a-half Kiddie Games.

GIC’s loss on UBS and Citi can fund 13 YOGs

In Banks, GIC on 01/10/2010 at 6:17 am

The unrealised loss is S$5.5bn or 28.8% of the total investment in both banks. (S$18.1bn). This can fund slightly more than 13 of VB’s Kiddie Games and buy the poor (he berates) all the hawker and restaurant meals (sharks’ fin combs included) they will ever.

At last Friday’s closing price of US$3.90, Citi’s shares would be worth about US$4.4 bn, compared to the US$3.3 bn (S$4.3bn) cost. This gives  GIC a paper profit of US$1.1 billion (S$1.5bn). Gd job GIC. And I didn’t take into account the profit it made selling part of its stake.

But GIC’s investment of 11 bn Swiss francs (originally convertible notes issued by UBS) or S$14.8bn is showing an unrealised loss of 4.9 bn francs (S$6.6 bn) based on last Friday’s closing price, even taking into the 2 bn francs it received in interest.

GIC now owns 3.8% of Citi’s common stock and 6.4% of UBS’s common stock, GIC said at a briefing on its latest annual report on Tuesday.

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

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?

GIC: US will not prosecute UBS

In Banks, GIC on 18/06/2010 at 6:52 am

Switzerland yesterday  ended months of uncertainty after the country’s parliament finally approved legislation allowing the transfer of 4,450 names of American clients suspected of evading taxes to be passed to the US authorities.

The decision followed days of parliamentary squabbles  that threatened to delay the treaty.

Switzerland promised to deliver the names by August 19. A failure  could have prompted US legal action against UBS, destroying shareholder value.

GIC/UBS: It’s going to be a long hot summer

In Banks, GIC on 17/06/2010 at 7:45 am

The Swiss upper house on Wednesday rejected the idea of a popular referendum to decide on the UBS client data deal, putting it at loggerheads with the lower chamber and casting doubt on how Bern will keep its promises to Washington.

NYT piece.

Reminder: So long as the deal is not approved, the danger is that the US may decide to prosecute UBS  for helping its US clients evade taxes. This could destroy UBS .

As MM is among Time’s 100 world’s influential people and ST is forever playing up his influence with US policy makers and as he is chairman of GIC, shouldn’t he be calling the US president? The US has an interest in S’pore’s continued stability under the present government.

GIC: UBS-US tax deal approved (somewhat*)

In Banks, GIC on 15/06/2010 at 5:13 pm

GIC can relax. Much earlier than expected the Swiss parly approved the deal.

If it had not been approved, UBS shareholders could have said bye-bye to their money. The US was threatening to indict UBS for assisting in the evasion of US taxes.

Update 16 June

Opps spoke too soon.There is a proposal for a national referendum on the accord, leaving its ultimate fate in doubt.

Will be a long hot summer as GIC (and we S’poreans) wait to see whether the US prosecutes UBS.

*And title was updated too to reflect continued uncertainty.

GIC: Shld have read this before buying BP

In Energy, GIC on 12/06/2010 at 9:16 am

GIC may have lost as much as S$760 million dollars in its investment in British oil giant BP, according to data provided by Bloomberg. Story from Corporate Observer.

Obviously GIC is not aware of this analysis.

Once a company gets very large, its growth rate inevitably slows. Its success will have attracted admirers, inflating its valuation. And then there is “tall poppy” syndrome, the tendency for the leading company in an industry (Goldman Sachs, Microsoft) to be the subject of political and regulatory attack.

Rob Arnott of Research Affliiates has quantified this process. He looked at the Wall Street sectors between 1952 and 2009 and saw how the leading stock in the sector performed over subsequent one, three, five and 10 year periods. On average, the tall poppies underperfomed by 3-4 percentage points a year. Getting exposure to a sector by choosing its largest component is thus the quick route to underperformance. Interestingly, Mr Arnott found the performance was worse when government spending is rising; suggesting that active govcerment means more regulation which means bad news for the big stocks.

Given that sector leaders comprise around one-quarter of the market value of the Russell 1000, that means investors could outperform by almost a percentage point a year by owning the entire sector minus its leader.

MM is vindicated. A few yrs back, he said he doesn’t understand mining, hence GIC did not go into mining projects. What is oil exploration except mining by another name? Temasek better watch out

GIC: UBS remains in limbo

In GIC on 09/06/2010 at 7:26 am

A major tax agreement between the US and Switzerland has been rejected by the Swiss parliament.

The deal would have paved the way for Swiss banking giant UBS to disclose account details to US tax authorities.

The late vote by Switzerland’s lower house of parliament is unlikely to kill off the deal, but may mean weeks of delay.

In the mean time, UBS mgt will have to limp on, with the threat of US legal action that could destroy the bank continuing.  It will be a long hot summer for both mgt and GIC.

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

“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

Our SWFs: Another question our MPs should be asking

In GIC, Temasek on 04/06/2010 at 9:56 am

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.

China: a problem S’pore doesn’t have

In China, Economy, GIC, Temasek on 31/05/2010 at 6:03 am

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?

AIA takeover is nuts, PRU shareholders advised

In GIC, Insurance, Temasek on 26/05/2010 at 6:45 am

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.

Our SWFs: Learning from the Arabs III

In GIC, Temasek on 13/05/2010 at 6:16 am

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.

Related post

Suggestion on how to motivate GIC, Temask staffers

Our SWFs: Learning from the Arabs II

In GIC, Temasek on 12/05/2010 at 12:29 pm

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.

Our SWFs: Learn from the Arabs?

In GIC, Temasek on 12/05/2010 at 5:39 am

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

Value investing at its best

In GIC, Temasek, Uncategorized on 02/05/2010 at 7:05 am

Buffett has a big stake in Goldman Sachs and the recent problems there had “experts” saying that he must have lost serious money. But no: the fall is gd for him, “Heads he wins, tails he still wins”.

FT reports:

In a surprising turn however, Mr Buffett, also explained that the travails at Goldman had been specific net positive for Berkshire, which bought $5bn of preferred shares paying a 10 per cent coupon at the heart of the credit crisis when Goldman was in need of additional funds.

Despite the roller coaster share price ride, Mr Buffett said that the headline challenges facing Goldman made it less likely that the bank would call its preferred shares. Those earn Berkshire almost $500m a year. If it the shares were called Berkshire would get $5.5bn back, but could only deposit that in low interest accounts earnings less than $20m a year.

“Every day that Goldman does not call our preferred is money in the bank,” Mr Buffett said. “Our preferred is paying $15 per second … so as we sit here… tick tick tick … its $15 in the bank. I don’t want those ticks to go away.”

If only the FTs, scholars and ex-SAF generals were quarter as gd, GIC and Temasek could make better returns, giving government more money to help the needy. They should realise, as FT’s Lex says, Funny how “once in a lifetime” opportunities roll around every few years or so.

SWFs’ big equities bets underperform

In GIC, Investments, Temasek, Uncategorized on 01/05/2010 at 6:16 am

Companies do badly after foreign sovereign wealth funds buy their shares, according to”Sovereign Wealth Fund Investment Patterns and Performance” by Bernardo Bortolotti, Veljko Fotak and William Megginson, reports the FT.

When an SWF invests, the target company’s share price often jumps in the days surrounding the investment, the research found, but over the following year or two, the share price significantly underperforms its peer group.

SWFs usually take significant stakes in companies – the median stake, according to the research, is 8%, the average 14% – and frequently buy the shares directly from the companies rather than on the open market. After two years, the average investment had lagged its peers by 10%.

“They’re giving cash to the companies and taking a large passive stake. All the literature shows this is a bad idea,” said Prof Megginson. The exception that proves the rule is the Norwegian Government Pension Fund, which makes small scale investments in publicly traded shares.

When its results are stripped out of the data, the negative impact of SWF investment looks worse, with an average underperformance of 13.55%.

The findings support the academics’ “Constrained Foreign Investor Hypothesis”, which predicts that foreign investors, particularly SWFs, will find it difficult to hold directors of companies to account because political considerations make them reluctant to antagonise management.

Political concerns may also deter them from selling shares in companies that are not performing according to expectations, removing another possible feedback mechanism that might improve the management of a company.

The underperformance that follows such passive ownership is a problem for other shareholders as well, said MrPeter Butler, chief executive of Governance for Owners.

“It’s the free-rider problem. SWFs are relying on other shareholders [being engaged owners] and holding directors to account. Either they get something for nothing, or nobody does it and the shareholders suffer,” Mr Butler said.

The new research will likely cause some debate, particularly as it flatly contradicts other studies that showed companies benefiting from SWF investment. Nuno Fernandes, professor of finance at IMD and a Lamfalussy research fellow of the European Central Bank, recently published a paper showing SWF investments led to a significant outperformance by the company. Prof Fernandes reported that further research led him to conclude SWFs were actually very good at monitoring companies where they had invested, as well as opening up new markets for the companies and helping them lower the cost of capital.

So Temasek and GIC be warned.

Our SWFs: What our MPs are not asking II

In GIC, Investments, Temasek on 30/04/2010 at 9:52 am

Do they even know that, Norway’s finance ministry will tighten risk controls over the country’s sovereign wealth fund but has rejected calls for an end to active management?

The scope for active management of the NKr2,757bn US$456bn) oil fund will be limited  after criticism of its performance during the financial crisis.

Norway has been reviewing its investment strategy since the fund lost 23 per cent of its value in 2008, doing worse than the decline in the benchmark portfolio against which it is measured. Initial calls for a shift to passive management have become more muted as the fund recovered most of the previous year’s losses in 2009 and outperformed the benchmark by 4.1 percentage points.

However, the report proposed the scope for active management, measured in terms of expected tracking error from the benchmark, should be reduced from its upper limit of 1.5 percentage points to 1 point.

Other proposals included limits to leverage and tighter regulation of risk concentration.

The fund, officially known as the government pension fund, recorded a return on investment of 25.6 per cent in 2009, the best in its 13-year history, on the back of its worst performance the year before.

As the Norway Fund went into the crisis underweiged equities, it used the opportunity to load up on equities last yr.

Our MPs should be asking ministers why S’pore is not following the Norwegians?

Fat chance as they never asked these the questions in this posting.



In Marchm Carl Heinz Daube, the head of Germany’s formidable debt management agency, travelled to China and Singapore for a meeting with two of the world’s biggest investors – as part of an attempt to tap a new pool of investors, such as sovereign wealth funds – who might be willing to buy German government bonds.

Sumething that the FT said “that would have seemed almost unimaginable – or unnecessary – five years ago.”

Motivating the elite: learning from N Korea

In Corporate governance, GIC, Temasek on 18/04/2010 at 10:41 am

Maybe MM Lee shld take a lesson from N Korea, even though S’pore is not N Korea

No not execute* the GIC and Temask executives whose judgement lost us billions and made MM look no longer like a sage that he undoubtedly is, but an ordinary mortal that is stupid. He had defended the bank investments saying they were for 30-yrs. Now we know that it might take that long to recoup our principal in UBS; and that Temasek sold out of BoA while a top hedgie was buying.

But he could do something to those who goof up, so that others are more careful of messing-up. Even if those who goofed do not deserve to be punished.

What about caning them? So that the executives in GIC, Temasek , TLCs and GLCs will buck up. My friend heard him say at a lunch some years back of “Lining up some people and giving them six of the best [cane them]”. He was speaking at a lunch in his honour when he last visited KL. My friend was seated beside him, or so my friend claims. But my friend has been known to tell fibs.

If caning sounds outrageous in a civilised place, in the mid-18th century, the British court-martialled and executed an admiral for failing to “do his utmost”. It was meant “to encourage the rest”**. As the admiral executed was the son of an admiral, all naval officers (aristocrats, gentry or upper middle, the lot of them) knew that, if it could happened to a lord and an admiral’s son, it could happen to any of them.

A naval historian wrote that the execution forged “a culture of aggressive determination which set British officers apart from their foreign contemporaries, and which in time gave them a steadily mounting psychological ascendancy”.

For the rest of the 18th century and the whole of the 19th century, Britannia ruled the waves.

BTW the admiral had reason and justice on his side (just like the SWF executives, I’m sure): little gd it did him. And little gd should it do the executives. There are more important things that justice and fair play for individuals when matters of state or profit are concerned.

Hmm, maybe the N Koreans know their British history, better than MM, a Cambridge man.

*They executed the finance chief who messed up a currency reform resulting in protests and a climb-down by a government that is usually brutal towards protestors.

** Another reason was to appease public opinion. People were upset that as a result of his actions (very reasonable), a fortress was lost.

Temasek: MM Lee being ignored?

In GIC, Temasek on 05/04/2010 at 6:04 am

Bit strange this. Last week, two mining deals involving Temasek were annced*.

Strange because MM Lee said several years back that GIC would not invest in mining entures, because he didn’t understand mining. OK I know he is chairman of GIC but has no post in Temasek but remember Deng Xiao Ping had no official post in the CCP or government when many of the reforms were carried out.

So is Temasek ignoring MM’s sagacity at its, and our peril? Remember a few yrs back, he said SIA shld divest itself of SIA Engr. SIA told the world that SIA Engr and SATS were core to its strategy. Last yr, it divested its stake in SATS via a dividend-in-specie.

Things can go badly wrong, when MM’s sagacity is ignored. Juz like when Temasek divested itself of its BoA stake just as market was turning. Remember MM had defended Temasek’s purchase of Merrill Lynch as one for 30 years. Who was the wiser? MM or the pros at Temasek?

Anyway, don’t the instances where MM is ignored by Temasek and its TLCs show the lie that Dr Chee, his SDP and their local new media and foreign media allies are propogating: that MM is still the puppet master and that the PM and his cabinet his toys.

If Temasek and TLCs don’t listen to him, why shld the cabinet? Why indeed shld anyone?


— It will invest US$100 million in Platmin, a South Africa-based platinum miner. This will be in the form of convertible debt in the company. Temasek can convert all the debt into common shares at US$1.215 or about S$1.70 a piece when it matures on December 31 this year. It will then hold less than 20 percent of shares in Platmin.


— Temasek will buy about US$490 million ($685 million) of subscription receipts from Inmet Mining.The Toronto-based diversified miner said Temasek’s Ellington Investments unit will buy some 9.2 million subscription receipts, which will each be bought at about C$54 ($75). Proceeds will be held in escrow pending exchange of the receipts for Inmet common shares. The receipts will be exchanged for the 9.2 million shares, representing a 14.16 per cent stake in Inmet on a non-diluted basis. Inmet will use the money from the deal to develop the Cobre Panama copper project and for general corporate purposes.

“I goofed,”US$12 trillion man

In GIC, Temasek on 27/03/2010 at 6:53 am

His company, BlackRock, controls or monitors more than US$12 trillion (GIC and Temasek have, at best, an estimated US$700 billion), yet he admits he and his team made mistakes during the recent crisis.

“At the mention of these blunders*, Fink, who has been sprawled in his chair, suddenly stiffens. His voice takes on a harsh tone that is leavened only by his visible anxiety. “When you manage money, you are going to make mistakes. You are not going to be 100 percent perfect. Our job is to minimize those problems, to cauterize them,” Fink says, his voice rising. “We’re not perfect, and I’ve never said to anyone that we are going to be perfect. Our investors had all the information we did and they did their own due diligence.” He exhales deeply. “Our real-estate division is struggling because of bad performance, and we’re making changes. I don’t care if the whole industry blew up, our job is to do better than the industry, and we didn’t in real estate,” he says. “I am not making excuses. I lose sleep over these problems.” The Stuyvesant Town loss was “an embarrassment,” he says. Then his voice drops to a whisper. “I mean, my mother gets her pension from calpers.””

If you want to know about one of the heroes of the recent crisis, read this Vanity Fair article. Warning — runs to over eight pages.

*His blunders — “There was the strong backing of Lehman Brothers’ management as the bank was imploding, kicked off by BlackRock’s purchase of a large block of Lehman stock at $28 a share, three months before the firm went bankrupt. And shortly after Bear Stearns collapsed, Fink advised investors to put their money into riskier, high-yield debt, just before that market tanked. BlackRock … also contributed its share to the toxic-asset morass—with close to $8 billion of collateralized-debt-obligation deals that defaulted in 2007 and 2008.”

‘But BlackRock’s most public and costly mistake—for its clients, at least—was its purchase of the iconic Manhattan housing complex Stuyvesant Town and Peter Cooper Village, a $5.4 billion deal that went into default in early January.” Remember GIC is an investor in this too.

BTW Temasek’s comments when it was criticised for losing money over BoA/ Merrill Lynch. If anyone has seen Gic’s comments over its Stuyvesant or UBS loss let me know.  Not seen any on its website.

DBS: What the new chairman shld be looking at

In Banks, GIC, Temasek on 24/03/2010 at 5:27 am

CIMB is regarded as having overtaken DBS in the race to become a leading bank in the region according to Ranu Dayal of  Boston Consulting, BT reported a few days ago, though DBS remains the biggest South-east Asian bank by market capitalisation.

Hey whaz this?

CIMB is from M’sia, a country that is not as meritocratic as S’pore according to the then SM and PM  in the 1990s, now MM and SM respectively. While SM cocks things up regularly (for example, in the 1990s and early noughties, when he was PM, S’pore got complacent and productivity fell), MM gets most things right.

So how come CIMB overtakes our national banking champ (err shld it be chump?). Makes me ashamed to be a S’porean. I mean the meritocratic policy is in this region “uniquely S’porean”

Wait a minute, DBS has had Foreign Talents as CEOs and senior executives since the late 1990s. Could this be the problem? The FT policy trumps the meritocratic policy.

I am surprised that anti-government subversives are not using DBS to show up the government.  Given the track record of DBS,  one could reasonably argue that the FT policy is rubbish — overpaying for Dao Heng so much so that DBS had to take an impairement charge of over S$1 billion; making its Treasured clients (they are only S’poreans, not “countrymen”) poorer (HN5 notes); and running down the expensively acquired POSB brand before realising its potential and spending $ rebuilding the brand.

And the SDP and friends can reasonably cite CapitaLand, another TLC, as an example where FTs are scarce, but where locals do well at managing a TLC. The CEO is a local and so are many senior executves. It is the leading regional property company (by reputation and market cap) and a big player in China. More than can be said of FT-laden, spastic DBS.

Of course, one could argue that there is no casual relationship between bad performance and being FT-laden,and gd performance and being local-led.  And that one FT- laden bank does taint other FT-led companies. So look at the other listed TLCs — Keppel, KepLand, SembCorp, SIA, SATS, ST Technologies, SIA Engr, SingTel, Starhub, M1 and NOL. And judge for yrself.

Back to DBS, yesterday BT had an article speculating what the incoming chairman could do for shareholders. Well he could relook the FT policy at DBS: is the policy flawed or just that the wrong FTs were recruited? Too many people from Citi, the bank that the US government had to rescue? As a HSBC shareholder and customer, I can attest to the damage that these ex-Citbankers did before they moved on.

Update on 25 March 2010

Footie fans (FTs and those who hate RI, I assume) insist I post this to show that locals can be as rubbishy as FTs.

S’pore is not N Korea

In GIC, Temasek on 19/03/2010 at 5:57 am

Recently The Reform Party’s Sec Gen told Reuters that in the private sector, “heads would have rolled” over the billion dollar losses that Temasek and GIC lost. He should know — he was a hedgie. Of course he did not mean to be taken literally.

Today the NYT reported that there are unconfirmed reports that N Korea’s finance chief had been executed by firing squad. He had been in charge of a currency reform programme that ended up with public protests, and some changes to the programme by the government.  Things unknown there.

Executives at Temasek and GIC must be glad that the S’pore government is more tolerant of failure. It also shows that comparisons between the two governments are wrong. LKY is right when he says that it is wrong to compare the two countries.

UBS: GIC’s Shin?

In GIC on 16/03/2010 at 5:23 am

Oh dear.  “The Swiss banking giant UBS has stepped up its lobbying to pass a treaty with the United States that would resolve a dispute over tax-evading clients, amid signs that the deal is running into trouble in [the Swiss] Parliament,” NYT.  Reminder: if the US goes after UBS, UBS could go the way of Arthur Anderssen, the auditing firm that died because of its misdeeds.  Then we might never recover our investment.

Looks like UBS is becoming GIC’s Shin — the losses, fallout and bad publicity of this investment (like Shin for Temasek) go on and on.

The latest on Shin is that Thai Prime Minister Abhisit Vejjajiva has appeared on national television to reject a demand from demonstrators that he resign by midday and call elections. In response the demonstrators are stepping up the tempo. So far, there is no violence.

Our SWFs: What our MPs are not asking

In GIC, Temasek on 15/03/2010 at 4:35 am

In the US, there is growing concern that public pension funds are taking excessive risk to meet their targeted returns. —NYT article.

Our MPs should be asking ministers about the risks our SWFs are taking relative to their returns, not easily batted away questions on losses. In the context of the portfolios, the losses are as Mrs SM could have said (but didn’t),”Peanuts”, and as any CFAer could tell you, “Look at total portfolio return, not individual items”.

And asking if they are aware that Norway’s SWF commissioned a report by three business-school academics—Andrew Ang, William Goetzmann and Stephen Schaefer from Columbia, Yale and London respectively – that found that taking the recent crash into account, the fund’s performance was essentially indistinguishable from that of a passively managed index fund.

And what is the experience of Temasek and GIC in this passive versus active debate.

I don’t expect PAP MPs (hey they can be disciplined for being difficult and anyway there is such a thing as loyalty) or Chiam (he is sick) to make life difficult for ministers. But where is Low (Waiting for pension?), or Sylvia (Waiting to be given Low’s seat?);  and NMPs for?

Or for that matter the SDP? I don’t incude RP or KJ  because to do the economic analysis they are doing (and put it into understandable language)  is not easy, so let’s cut them some slack.

Miss Siew Kum Hong. His ideas of human rights did not only encompass gay and feminist issues like “anal sex is OK”, but also, what the Chinese Communist Party rightly includes as a human right, “economic rights”.  He gave a great speech on CPF and asked the right qns on our SWFs.

UBS: This shld worry us

In GIC on 12/02/2010 at 10:28 am

US hanging tough, playing rough,unwilling to re-enter talks to alter the deal struck with Switzerland to end a damaging tax case against UBS, the U.S. ambassador in Bern was quoted saying in a Swiss Sunday paper.

Other recent postings

UBS: That dog with fleas

In GIC on 10/02/2010 at 3:39 pm

The good news you can read in our MSM.

The bad news, that you may have missed, is that outflows from UBS’s wealth management and Swiss banking operations nearly doubled to SFr33bn compared with the previous quarter, and SFr12bn flowed out from the US wealth business. Like their rival Credit Suisse, and the smaller Swiss private banks, wealth management and Swiss banking operations are at the heart of UBS’s operations and profitability.

The ongoing problems with the US tax authorities are not going to help staunch the outflow in these areas. The US accused UBS of hiding nearly US$15bn in assets of US customers, and is seeking the account details of some of UBS’s US clients.

For what its worth, UBS  said they were confident that the long-running dispute with US tax authorities would be resolved.

Wondering why I blog so much on UBS? Two reasons.

One, is that UBS are a fascinating case study in what can go wrong in a super blue chip. When S’pore Inc bought into Merrill Lynch, Citi and UBS, I had concerns about the investments in the first two.  But UBS? Tot it was a no-brainer, dunk slam investment.

The other is that GIC manage our reserves: this is one major balls-up.

GIC: Can UBS survive US indictment?

In GIC on 30/01/2010 at 5:41 am

Great time for UBS’s survival to be questioned, when bonds held by GIC must be converted into UBS shares by 5 March, 2010.

[Reminder: In December 2007, GIC invested 11 billion Swiss Francs for these bonds that would give it 9% of UBS. It later had to invest an undisclosed amount to prevent a dilution of its stake when UBS called for a rights issue to cover mounting losses. Later the Swiss government had to take a 9% stake to cover yet more losses.]

Last August, it was feared that UBS would not survive if it were indicted in the United States for failing to provide details of  tax evasion by US citizens (Note the concern abt UBS not surviving the indictment was not reported here: both in MSM amd bloggers). Its failure could have undermined Switzerland’s economy. And of course Singapore’s reserves.

Now: “The Swiss government on Wednesday backed off an agreement with the United States that required it to hand over the names of wealthy American clients of the Swiss bank UBS who were suspected of tax evasion.

‘The announcement, which came after two Swiss courts ruled that the disclosure of client names would be illegal because it would violate the country’s secrecy laws, threatened to open a new front in the investigation into UBS by the Justice Department.

‘While the Swiss cabinet … would continue talks with the United States on the matter … there was a risk that the United States would resume civil proceedings filed against UBS in a Florida court last year. That case sought to force UBS to disclose the names of 52,000 wealthy American clients suspected of tax evasion through UBS’s private bank.

‘That lawsuit was suspended in August when the Swiss government, acting on behalf of UBS during months of intense negotiations, promised to hand over 4,450 UBS client names.” Full article

So if no new settlement is reached, UBS can be indicted again. And the issue of whether it can survive will again be asked.

This is one jinked investment.  Time for MM (GIC’s chairman) or Tony Tan (executive director) to go an visit some holy man to ask for the bad luck to go away?

GIC NY Loss: US$100m more?

In GIC, Property on 27/01/2010 at 7:59 am

According to a NYT article, GIC may have invested US$100m more than our MSM reported.

“The Government of Singapore Investment Corporation, which made a $575 million secondary loan, and invested as much as $200 million in equity [note  ST etc report this as US$100m: 100% less], stands to lose all of that.”

But to be fair to GIC, in the immortal words of the character Chuck (played by Steve McQueen) in the Magnificent 7, “It seemed a good idea at the time”, when the seven cowboys realised they were up against an army of Mexican bandits.

“At the time, it looked like a sound investment,” said Clark McKinley, a spokesman for Calpers, the giant California public employees’ pension fund, which bought a $500 million stake in the property. “When the market tanked, we got caught.”

‘”Many of the other companies, banks, countries and pension funds — including the government of Singapore, the Church of England, the Manhattan real estate concern SL Green, and Fortress Investment Groups — that invested billions of dollars in the 2006 deal stand to lose their entire stake.”

‘This month, several of the secondary lenders sent letters to Tishman Speyer and BlackRock threatening foreclosure because of the default. The partners tried unsuccessfully to craft a new deal that would have involved them putting up “several hundred million dollars,” in return for restructuring the loans, according to one real estate executive briefed on the negotiations.”

Note GIC is one of the secondary lenders but it is not yet known if it was one the u/m poker players.

“The secondary lenders, he said, had “overplayed their hand” in the hope that they would get back some of their investment. Instead of being forced into bankruptcy, Tishman Speyer and BlackRock will walk away sometime after a new manager is in place.

‘This month, several of the secondary lenders sent letters to Tishman Speyer and BlackRock threatening foreclosure because of the default. The partners tried unsuccessfully to craft a new deal that would have involved them putting up “several hundred million dollars,” in return for restructuring the loans, according to one real estate executive briefed on the negotiations.”

Full article. Click graphic to see where exactly GIC put its $.

GIC’s US$675m loss juz be the beginning?

In GIC on 24/01/2010 at 7:17 am

What should concern S’poreans more than GIC’s US$675m loss from “its investment in Manhattan’s largest residential enclave” is that GIC is a big investor in US property, spending billions of dollars over the years (sorry can’t insert links on examples: they all break) though to be fair to it in 2006 it said it was diversifying into Brazil, India and China.

“Anybody who bought property in the last six years has their equity pretty well washed out,” said Ray Torto, chief economist at CB Richard Ellis, a real estate firm. “People are looking back on that period as the peak of the madness, the bubble. The expectation was that there was always someone who would pay a higher price after you,” part of  an article about the promoter of the investment that lost GIC about US$675 million.

“Instead of rents and values rising unchecked, the value of commercial office buildings in the United States has dropped 43 percent, on average, since November 2007, according to economists’ estimates. If unemployment continues to rise, an ugly situation could turn nightmarish,” it continues.

As to the promoter,

“Tishman Speyer, which has no corporate debt, earns fees for developing and operating the buildings but usually puts little of its own money into a deal … In the $5.4 billion Stuyvesant Town deal, for instance, BlackRock and Tishman Speyer invested only $112 million each of their own money, which they have written off … Tishman Speyer took $18 million a year in fees; company executives say they began waiving the fees in fall 2008.”

Update 25/1/10

Complex Is Turned Over to Creditors

Question is whether GIC is one of the creditors? Trying to find out.

Update 26/1/10

It is confirmed that it is likely not to get anything back.

A Contrarian Trade or Betting against SWFs?

In Energy, GIC, Temasek on 29/12/2009 at 5:43 am

Maybe it is time to buy the banks? Like John Paulson who is long BoA (Remember he correctly predicted the sub-prime credit crisis in 2007. That reaped him a US$3 billion profit.)

In a story from Fortune: “The next wave of sovereign wealth fund investments is likely to look very different from the flurry that occurred before the crisis. For one, the funds have drastically cut back on banking assets. Just 16% of the deals they made this year involved the financial sector, down from 48% in 2008, according to Barclays data. (Remember Temasek’s and GIC’s investments in Merrill Lynch (BoA), Barclays and UBS; and Temasek’s sales of BoA and Barclays.  GIC  only made wagga($) on Citi and it could get diluted there on its remaining holdings.)

And short or sell natural resources.

“Meanwhile, including China Development Bank, which received a capital boost from China Investment Corp., more than 50% of sovereign wealth funds’ investments were in the natural resources sector, up from a mere 8% the year before. Huey Evans points to the Chinese government’s investments in Rosneft and Petrobras (PZE), oil companies that agreed to send the country fuel in exchange for loans.”

Where GIC and Temasek gets their $

In Economy, GIC, Temasek on 26/12/2009 at 1:08 pm

“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.

Not quite correct because the money that GIC and Temasek invest comes from government surpluses. As about 43% of Singaporeans don’t pay income tax, this means that the surpluses are generated by 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.

Now MM Lee’s view is that Singapore needs the reserves should anything go badly wrong. He could have quoted the example of Kuwait, which surprising he has not. When Kuwait was invaded by Iraq, the reserves were used to help pay for the war. And afterwards for the reconstruction of the country. He could have cited Iceland and Dubai (which again he hasn’t) as countries that got into trouble because they ran out of $.

BTW, 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.

For the technically minded, 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 is)  part of that 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 the government is correct, but so what is the retort? The financial effect is the same as if our CPF monies are invested abroad.

Finally, 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 from less than optimal government spending.

So the quote at the beginning of this piece has elements of the truth.

Where value investing can go wrong

In GIC, Investment banking, Investments, Temasek on 24/11/2009 at 8:25 am

“A study by Standard & Poor’s, one of the world’s leading credit rating agencies, has raised questions over the financial strength of some of the biggest banks ahead of new rules that could require them to raise more funds.

‘The analysis by S&P showed that HSBC is the best capitalised bank in the world, while Switzerland’s UBS, Citigroup of the US and several of Japan’s biggest banks are among the weakest.”: an excerpt from the FT.

No the purpose is not to show that highly paid managers at GIC goffed, or how smart I am. I have been a shareholder of HSBC since the 1980s. Even during Green’s (Christian + McKinsey, a lethal combination that always leads to problems) tenure as CEO, I kept the faith.

Now that the CEO is a man who joined the bank as an International Officer from a minor public school with I think A-levels, and he is basing himself in HK, one can only expect the return to the values that made HSBC great during the tenures of Sandberg, Purvis and Bond. Oh Purvis won the Military Cross in Korea, when he disobeyed orders to withdraw. He claimed he couldn’t hear the radio messge.

Sorry I am digressing. When Temasek bought into Merrill Lynch and Barclays and  GIC into UBS and Citi, I realised that they were buying into highly efficient banking machines. There was just enough capital for regulatory reasons and to provide a buffer for some things going wrong.  They needed a bit more cushion and GIC, Temasek were providing it.  Risky but history was on their side.

When the world recovered from the credit crunch of 2006, 2007, GIC and Temasek would reap the rewards of these finely tuned cash machines. They were the equivalent of the best of the best F1 cars.  I thought we had smart boys and gals. And that the risk would pay off.

But then came Bear Sterns, Lehman Brothers and AIG, and the rules changed. The winners were the better capitalised banks. If HSBC had as little capital as Citi, I’d be a poor man. The amounts it had to write-off on US sub prime would have shmed Citi. But it had capital.

So value investing doesn’t always pay off.

Free Option on Revival of a Swiss Bank

In GIC, Investment banking, Investments on 21/11/2009 at 9:39 am

“Analysts at Credit Suisse reckon that even though UBS will not be able to pay any dividends for the next few years, its shares are so cheap relative to the aggressive profit-targets that it has announced that they are a “free option” on a revival of the investment bank.” : Economist.

The issue is will the Swiss regulators allow the bank to expand as aggressively as it wants t,o especially as Switzerland had to rescue the bank.  Albeit the Swiss government made a good profit.

Readers may remember that GIC first bought into UBS in December 2007 and has been sitting on a loss ever since then.


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