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.
Archive for the ‘GIC’ Category
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..
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.
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.
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.
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. http://www.reuters.com/article/2014/04/30/wh-group-ipo-idUSL3N0NL2OL20140430. 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 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 (http://www.tremeritus.com/2014/03/13/gan-says-hospital-beds-increased-by-30-really/),
— 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 https://atans1.wordpress.com/2011/04/17/what-are-in-our-reserves-a-revisit/. Link also describes how budget surpluses and the reserves are linked),
— welfare for the elderly and needy. and
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.
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
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.
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.
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 recently sold out of its investment in British Airports Authority http://www.bloomberg.com/news/2012-08-17/qatar-buys-stake-in-heathrow-owner-baa-for-900-million-pounds.html
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 pricehttp://in.reuters.com/article/2012/08/20/msrresort-auction-idINL2E8JK6UJ20120820
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.
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
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.
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 http://www.bloomberg.com/news/2012-06-20/citigroup-may-take-5-billion-hit-on-forex-peabody-says.html
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 http://www.bloomberg.com/news/2012-06-18/citigroup-asia-fees-rising-as-debt-sales-counter-equity-slowdown.html.
*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.
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.
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.
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.
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.
(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.
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.
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.
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.
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.
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 (%)|
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 »
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.
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”.
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.
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.
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. https://atans1.wordpress.com/2011/07/26/gic-not-reported-in-st-cna-or-today/
If Tony Tan becomes president, he is only the security guard of the the reserves, True he can advise the PM, but the PM and S’pore will lack Tony Tan’s executive skills in a financial crisis.
So the PM should tell Tony Tan, “No more of this presidential rubbish, especially as your can’t communicate with “lesser mortals” to save their lives. Return to active duty for the sake of S’pore.”
And if TKL becomes president, so what? The PM can always get the doctors to certify him medically unfit to serve as president. They can use this very recent example
After the law minister made this statement, “The president cannot reject advice given by the Cabinet And he cannot engage in public debate with the government,”, TKL issued a statement implicitly agreeing with the minister. http://tankinlian.blogspot.com/2011/08/voice-of-people-and-constitution.html
Less than 12 hours later (albeit overnight), he came out to disagree with the minister saying, “I do not agree with his view that the President cannot speak about anything else without the approval of the Government. I find the Law Minister’s interpretation to be too narrow. It seemed to give the President less freedom of speech than an ordinary citizen of Singapore.” http://tankinlian.blogspot.com/2011/08/statement-from-tan-kin-lian-can.html
Shouldn’t he have said this in the first place?
And as to Tan Cheng Bock, if he was good enough for one Lee Kuan Yew to ask him to serve as a PAP MP when being asked to serve as a PAP MP was seen by the public as an honour unlike today (when the likes of Kate Spade Tin, Foo, Wee Kiak and Puthu can become PAP MPs) , and for the government of the day (which the PM was a part) to ask him to head a feedback unit, waz the problem of having him as a security guard president?
And as the law minister said, the PM can ignore his advice. Say if and when he asks the PM to think of the people when making policy decisions.
(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)
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.
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.
More than 50% of its profits come from emerging markets juz when emerging markets are losing their attractiveness to global investors.
Given Cit’s record of losing serious money by jumping into markets late (think sub-prime, and lending to finance LBOs, US property (in the 80s) and Latin America (in the 80s too), S,poreans should be concerned., given GIC’s 5%(?) odd stake in Citi,
The Fed notified financial institutions that passed a second round of stress tests that they can begin returning money to their shareholders, The results are confidential but already some US banks are saying they will raise dividends this year. Among them are Citi rivals JPMorgan and Wells Fargo. Citi says that only in 2012, will it consider raising its dividends, It got a lousy rating?
And I now know why the executive director of GIC is looking to increase US exposure. Read the rest of this entry »
I’ve ranted at how Temasek and GIC allowed investment banks to short change them (and us) in two IPOs: the share prices traded way above IPO price on listing,
Well it’s nice to see that the Indonesians screwed the investment banks over the Garuda IPO, the share price falling 20% below IPO price, with the underwriters stuck with abt half of the shares,
Now I’m not saying that our SWFs should play that rough with the investment banks — there will be adverse consequences for Garuda when it tries to raise more money and the Indonesian authorities when they try to sell other companies — but our SWFs should try to keep the premiums to around 5%. It’s hard, but they shld try.
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.
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
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?
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.
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 »
So said a senior American official, referring to a balls-up* in Afghanistan which showed the failure of British, US and Afghan intelligence.
“We have good growth; we have good plans and that is what we should be going into the election for – to mobilise people to support these plans and support the team which has brought this growth to them,” the PM said a few days ago.
But he forgot that there were two serious security goof-ups which proves twice over that “Something this stupid … requires teamwork”.
Mas Selamat climbed out of a detention centre, avoided capture despite taking refuge in his brother’s flat, and floated out of S’pore. Now anyone can do the first undetected, but the other two? And what odds all three consecutively? And if he can float out undetected, Pakis can float in, undetected, with explosives and illegal drugs.
And we had the SMRT depot break-in, that went undetected for days Given the threat of terrorism, S’poreans (and the authorities) were surprised that SMRT’s security was so lax. SMRT not an ordinary commercial company, it is also a GLC and TLC.
And then there were the PR damage limitation exercises that resulted from these incidents. They were so inept proving that “Something this stupid … requires teamwork” comes. We had the CEO of SMRT (an FT from M’sia) blaming the public, and MPs being told by the Home Affairs minister that that Mas Selamat could go undetected in the flat “was not a security lapse’ and that hundreds were probed. What weed were they smoking? Or drug they were taking? Or what alcohol were they drinkng? Or what combination of these? Read the rest of this entry »
Did you know that when the government sells state land to property developers, the money flows into the reserves (which are managed by our SWFs) and not into the Consolidated Fund like other government income? This is uniquely S’porean. Other countries credit land sales to income. The government’s rationale is that as state land is an asset, sale proceeds should not be credited to income but to capital (reserves). Makes sense, but that’s not how other governments account for land sales: even HK, and no-one can say that HK is badly run or profligate.
So when HDB “buys” land from the government it is adding to the reserves. As it and government claim that the price an apartment is sold does not reflect this price, they claim HDB makes a loss. But whatever it is (I leave it to others to dispute this claim), the reserves are increased.
So in addition to the surpluses (generated by thriftiness or meanness according to who is talking) and (indirectly via a circuitous route) our CPF monies https://atans1.wordpress.com/2010/11/02/how-we-fund-our-swfs/, sales of state land also contribute to the reserves that GIC, Temasek and the central bank manage.
There was one financial year ending March 2008 ( I think), where the government injected abt S$10 billion into Temasek. This sum was more or less equal to the amount that the government took in property sales for that year. Easy come, easy go as in the following yr Temasek could have lost as much as US$4.6bn (in 2009 March this would have been S$7bn) on Merrill Lynch. And there was the much smaller loss on Barclays (800m sterling?, then worth abt 1.7bn S$). Err not much change left over from injection: only S$1.3bn, “peanuts” as Mrs GCT might have put it, except she didn’t.
So this combination of surpluses, CPF money (indirectly via a circuitous route), and state land sale proceeds, have resulted in our SWFs having 179.5% more in assets than S’pore’s 2009 estimated GDP.
The Norwegian’s much larger fund (US$471bn) is only 23% more than Norway’s GDP. Abu Dhabi’s fund (at US$627bn) is 627% of its GDP. For those interested, I used FT’s US$248bn for GIC and US$133bn for Temasek. As to GDP numbers, I used CIA Fact Book as reference. (BTW, I’ve not taken into account the amt of foreign reserves that MAS manages because I could be double counting if I do. For the record, MAS says its reserves as at end 2009 are US$188bn).
So we got plenty of $ to make housing more affordable*. And there is no need to change constitution, or cut other expenditure. Juz change the accounting rules on land sales.
BTW, I am working with an illustrator so that it is easier to visualise the connections between CPF, surpluses, Consolidated Fund etc https://atans1.wordpress.com/2010/11/02/how-we-fund-our-swfs/ . Hope to post something one of these days. [Update on 4 December, the cartoon]
*Even after taking away our public debts; 8th in the world at 113.10% of GDP. [Update at 10.30 am]
This piece is an attempt* to answer,”If Singaporeans are not “hard-driving and hard-striving”, where did GIC and Temasek get so much money to lose?”: a posting on a Temasek Review article in late 2009.
The answer parroted mindlessly by the government is that government budget surpluses mean that GIC and Temasek get money to invest with.
A more detailed explanation has to start with how the surpluses arise.
As about 43% of the working population don’t pay income tax, and VAT and other taxes are relatively low: one way the surpluses are generated is by a government being thrifty (government’s view) or mean (view of many netizens).
Economists in the private sector, and the Reform Party (the sec-gen was once an economist and he has a first-class degree from Cambridge) have argued that rather than accumulate large surpluses that are then invested abroad, the government should spend more building up Singapore’s human capital. By spending more on things like education, healthcare and consumer protection, the returns generated will be better than the returns on overseas investments.
This is an argument that has excellent academic credentials. China is often asked by eminent economists ,”Why do you export so much when you, in return, use the surplus lend to the Americans so that they can buy more from you?” The economists advise that China should invest more locally.
The government’s view is that Singapore needs the reserves as an emergency fund should things go badly wrong. The late Dr Goh Keng Swee talked of spending the reserves in a recession (as has happened recently). Dr Goh and others could also have quoted the example of Kuwait. When Kuwait was invaded by Iraq, the reserves were used to help pay for the war. And afterwards for the reconstruction of the country. They could also have cited Iceland and Dubai as countries that got into trouble because they ran out of $, when they could not borrow any more.
The second reason why surpluses occur is that our CPF monies are invested in special government bonds. The $ from the bonds flow into the government’s Consolidated Fund together with revenues from taxes etc. All government expenses are paid out from this fund. If there is a surplus (as there usually because the government is thrifty or mean depending on who is doing the talking) part of that surplus can go to GIC and Temasek. The government argues that because all the monies in the fund is fungible (cannot be separated), one is wrong to argue that CPF monies are invested abroad.
Technically and legally the government is correct, but so what is the retort? The financial effect (though not the legal consequences) is the same as if our CPF monies are directly invested abroad.
And these special bonds are the reason why S’pore is up there on a list that the local media does not ever publicise. S’pore has the 8th highest public debt to GDP ration (113.10%) in the world. Greece is 7th with 113.40. Other countries on the list above us are Zimbabwe (champion), Japan (second), Lebanon and Italy. Iceland is 9th (106.7) while Ireland is at 36 (57.7).
(Aside, could this high debt to GDP ratio be the reason why the govmin wants to force-feed GDP growth through immigration? I may explore this issue in future and I hope RP will explore the issue as something the electorate should be educated upon.)
Singapore is unique among the countries with the largest sovereign wealth funds. The other SWFs are effectively funded from oil revenues. In the case of Singapore, it could be reasonably argued, by government critics, that the funding results from the “hard-driving and hard-striving” Singaporeans who are forced to save and lend the money to the government; and from less than optimal government spending.
So the quote at the beginning of this piece has elements of the truth. And worse: one could reasonably argue that the government makes something for itself from “hard-driving and hard-striving” S’poreans. One noted local economist has said that the government is effectively pocketing the difference between the returns it gets from investing abroad and the returns it pays on our CPF accounts: a carry trade arbitrage. Borrow low and invest for higher returns.
*What with an election coming, I tot I should revise (and repost) a piece I did in December last year. The revision has been pretty extensive.
Mapletree Industrial Trust was up 25% from its issue price on its first day of trading while GLP (Global Logistic Properties) was up 11% on the first day of trading last monday.
For MIT, this meant that Temasek could have gotten S$300m more and GIC S$385m more for the GLP shares it sold. Not peanuts.
What this means is that the IPOs were priced badly. Ideally an IPO should open at a modest premium from the issue price. 5% would be fair.The investors make a modest profit, while the issuers get a gd price. So my S$685 is an exaggeration, the loss should be S$651m.
Now investment banks will always try to underprice issues because they want happy investors and don’t want to be stuck with unsold shares. Usually they get away with underpricing because issuers don’t know the intricacies of corporate finance. But Temasek and GIC are full of financial whiz-kids, or sure so we are assured.
But then maybe they gave away such a big discount because the money wasn’t theirs?
“It wasn’t that hard for me, just so you know. I made the decision to use your money to prevent the collapse from happening.”
– President George W. Bush, speaking at the University of Texas at Tyler on Tuesday night, via the On the Money blog of The Hill.
If Siew Kum Hong had been been an NMP, I’m sure a parly question would have been asked. But the people-in-blue, “My wife is entitled to my seat” man and the NMPS are likely to remain silent. Our only hope is for one of the whites to ask the question.
Once upon a time, India deemed GIC and Temasek to be one entity and there was a 10% on the joint holdings of both in Indian companies. The Comprehensive Economic Co-operation Agreement (CECA) which was signed in 2005 provided that Temasek and GIC were to be recognised as separate entities, i.e. each is entitled to each own up to a 10% stake in a company.
There is a report in an Indian newspaper that the Securities and Exchange Board of India (SEBI) has ordered that both Temasek and GIC could only own up to a combined 15% stake in a company, or takeover rules would be triggered.
Can you blame one MM for once being sceptical abt investing in India?
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.
The second link talks abt GIC’s and Temasek’s pre -crisis strategy of investing in efficient (in hindsight thinly capitalised) banks.
My dig at GIC and VB got a response that implied I didn’t know the theory about judging results by the entire portfolio https://atans1.wordpress.com/2010/10/01/gics-loss-on-ubs-and-citi-investment/
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 $200 million in equity, stands to lose all of that,” in an investment in NY City.https://atans1.wordpress.com/2010/01/27/gic-ny-loss-us100m-more/
Translated into S$, 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.
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.
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 https://atans1.wordpress.com/2010/04/30/our-swfs-what-our-mps-are-not-asking-ii/
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.
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.
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.