Not true in S’pore

“The challenge is, if we want European levels of welfare payments and public spending, you cannot finance that with American levels of tax rates,” said Lord Mervyn King, former governor of the Bank of England, to the BBC recently.

As Chris Kuan, the retired chief economist of GIC and many others have said, we can have our welfare cake and eat it by making our reserves work harder.

How the PAP can help the poor, grow the economy and win votes while being “prudent” with our reserves

Budget: Consistently flawed/ Use more from Reserves meh?

And remember. WE, funded up the reserves not our millionaire ministers:

How we fund our SWFs

Budget: Consistently flawed/ Use more from Reserves meh?

Property sales also fund our SWFs

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

End of piece.

——————————————————–

IGNORE the repeats. Bit spastic in editing.

Property sales also fund our SWFs

Property sales also fund our SWFs

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Reason why die die must have GST rise in January to replenish our reserves?

This despite inflation not abetting in this quarter, something that our millionaire ministers said would happen earlier this here.

In early July, I wrote about looming markdowns to private assets referencing the comments of Temasek’s CIO defending Temasek’s investments in private assets: Was Temasek’s CIO whistling in the graveyard? Note that GIC is also big investor in private assets.

Recently, the managers of Harvard University’s $51bn endowment have warned of substantial markdowns to come in its private equity and venture capital portfolio, predicting heavy losses for institutional investors.

Trumpets please.

.

What has this to do with the price of eggs, GIC?

As A S’porean, not a citizen of the US of A or a citizen of the world, I want to know what’s the real returns in S$ above global inflation. Because the S$ is our currency, not the US$.

Check this out at Cynical Investor’s takes on S’pore’s History: Very good documentary about the 60s and 70s.

Not the touristy or nostalgic BS, but why the old S’pore had to be demolished to save S’pore and make LKY and the PAP look great.

Time for our SWFs to buy into sports teams?

In the West, the latest investment fashion is to buy into sports teams. Private equity is rushing to buy into European football teams. Italian clubs have put up “For sale” signs.

“Sports assets have shown a low correlation relative to the broader market, with teams selling for record values through the 2008 financial crisis and Covid-19″, said Michael Kenworthy, head of sports investment banking at Goldman Sachs. He added that some valuations had outperformed other traditional investment benchmarks, such as the S&P 500.

“If you’re thinking about what’s the best way to construct a portfolio and you want to diversify, there could be, potentially, merit having sports assets in that portfolio,” he added.

Well the A-Rabs led the way. Many moons ago,

Sheikh Mansour bought Sitty for US$360m in 2008. Now a Chinese consortium led by China Media Capital is to buy a 13% stake in Manchester City* for US$400m. That puts City’s value at US$3bn.

Too bad for us HoHoHo doesn’t do footie

An almost 10X increase in valuation in about 8 yrs is not to be sneered at.

How much of Ant will S’pore Inc own?

Ant, the fintech controlled by Alibaba’s billionaire founder Jack Ma, will sell shares in a dual listing in Shanghai and HK. The sale, roughly 3.34bn shares, which account for 11% of Ant’s total outstanding stock, will fetch US$34.4bn

The Shanghai portion is worth Rmb114.9bn (US$17.2bn) or about half the total.  GIC is subscribing for Rmb2bn worth of shares (1.7%) and Temasek wants for Rmb1.5bn (1.3%) in Shanghai portion. Institutional buyers in the onshore deal agreed to hold half of their shares for 12 months, and the other half for 24 months.

Assuming that GIC and Temasek don’t buy any shares in the HK offering, GIC and Temasek will collectively own 1.5% of the public offering. Remember that the HK and Shanghai tranches are rough the same.

In the overall context of Jack’s and Alibaba’s holdings, the amount bis “peanuts”.

GIC goes elephant and ant hunting/ S’pore’s way of showing friendship to both India and China

This week Reliance Jio raised Rs248.9bn (US$3.4bn) from prominent global investors including GIC, TPG, Silver Lake and KKR for its e-commerce business.

GIC, already an investor in Ant Group, is looking to put more than US$1bn into the Chinese financial technology company’s IPO.

Meanwhile India and China are rowing and killing the other’s soldiers.

And India is banning Chinese investments and apps ( Can India afford to boycott Chinese investors? and Indian start-ops depend on Chinese money), and boycotting Chinese goods (Can India afford to boycott Chinese products?)

Great way to show S’pore is a friend of both.

The worrying thing is that it could end up upsetting both. And to pls both both, it’ll end up allowing more FTs in. SAD.

Why we need to know PAP govt’s projected investment returns and why it’s a secret

Look at this table

It shows that its assumed return targets are BS. Fyi, Calpers is the California Public Employees’ Retirement System, a major global investor. As of 2018, the agency had U$360 billion in assets.

Before I go further, some defining of terms. From shumething I wrote in 2018

[O]ver the last 10 years, Singapore’s net investment returns (NIR) contribution (NIRC) to the Budget has more than doubled from S$7 billion in FY2009 to an estimated S$15.9 billion in FY2018.

…

Waz this NIRC and NIR BS?

NIRC consists of 50 per cent of the Net Investment Returns (NIR) on the net assets invested by GIC, the Monetary Authority of Singapore and Temasek Holdings and 50 per cent of the Net Investment Income (NII) derived from past reserves from the remaining assets.

In other words, we spend 50 per cent of the estimated gains from investment, and put the remaining 50 per cent back into the reserves to preserve its growth for future use.

Associate Professor Randolph Tan is Director of the Centre for Applied Research at the Singapore University of Social Services, and a Nominated Member of Parliament.

Under PAP rule will S’pore become like UK or Venezuela?

Now to why I think we need to know PAP govt’s projected investment returns. In 2016, a reader asked

A Qn: The NIR used for the budget is projected returns. If the projected returns did not materialize, then how? It seemed like insurance agent selling us a policy on projected returns which never materialize.

Am I comprehending the NIR correctly? Because this seemed to me that there might be hefty tax increase down the road if the projected returns did not materialize. This will also affect all the social spending currently on Singaporeans

NIR, Budget untruths, & the President

That is why we need to know the projected Net Investment Returns (NIR) on the net assets invested by GIC, the Monetary Authority of Singapore and Temasek Holdings. Remember NIRC — Singapore’s net investment returns (NIR) contribution (NIRC) -consists of 50 per cent of the Net Investment Returns (NIR) and 50 per cent of the Net Investment Income (NII) derived from past reserves from the remaining assets.

For your info this is what ex-TOC star commentator, Chris Kuan (Today, he seems to be too objective for the team running Terry’s Online Channel: they look to be the ST of S’pore’s cyberspace), wrote:

Your reading of the Constitutional NIR rule is correct – the NIR Contribution is calculated on the expected long term real rate of return (LTROR) on the government’s net assets (assets in excess of its liabilities). Pls note it is REAL returns we are talking about – that is the actual dividends and market valuation of the net assets minus the inflation rate. Therefore not all returns are spent. Then the rule limits the spent to 50% – therefore more than half of the actual or nominal returns are re-invested. Again pls note this is nothing unusual, Norway’s GPF and university endowments permit up to 100% of the returns to be spent.

NIR, Budget untruths, & the President

As to why the PAP govt wants to keep the projected Net Investment Returns (NIR) a secret, I’m sure you are thinking what I’m thinking LOL.

Great GIC trade but there’s a catch

It invested US$1bn in the IPO Anheuser-Busch InBev’s Asia-Pacific unit: AB InBev Asia.

The shares were up 4% on the first day of trading yesterday.

Problem is that it can’t sell for six months because it’s a cornerstone investors. It got to invest so much for that reason.

Terry’s Team M’sia will never report stuff like this.

GIC outperformed by tell-all Norwegian SWF

By 15%.

GIC’s annualised 20-year real rate of return, its main performance metric, was 3.4 per cent up to the year-end in March. That compares with a real rate of return of 3.9 per cent since 1998 at Norges, the Norwegian sovereign wealth fund.

FT

Please remember that GIC (like Temasek) says it needs to be non-transparent to make money for us. Well tell that to the Norwegians who even tell the world the colour of the underwear of the fund managers.

Btw, GIC is investing less in stock markets, more in private equity. Who isn’t?

Temasek, GIC got this right in our backyard

Indonesia is really the place to be in e-commerce.

And Temasek is there: Indonesia: Temasek, Google & McKinsey singing from the same page

As is GIC via Bukalapak: an e-commerce unicorn: https://techcrunch.com/2019/01/18/bukalapak-raises-50m/

Btw, Go-Jek where Temasek has a stake has big plans in Thailand and Vietnam, as does Grab (where Temasek also has a stake).

 

 

GIC bitten once, still not shy?

Taz GIC when it comes to buying Swiss Banks.

It bot a 3% stake in Swiss private bank Julius Baer, in what FT says @is in a vote of confidence for the bank after months of lacklustre performance”.

FT went on

GIC was previously a large shareholder in UBS. Having purchased hybrid debt instruments in the bank during the financial crisis, the fund became its largest shareholder after the holding converted to equity. The fund sold off the bulk of its stake two years ago, however, after the investment failed to perform.

Related posts

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

What Mad Dog Chee doesn’t say about GIC’s UBS investment

Xiaomi: “Easy come, easy go” or why cybernuts happy again

Xiaomi, the [US]$100bn Chinese smartphone and TV unicorn? It’s now a $50bn unicorn after it decided to cancel plans for a Chinese depositary receipts issuance.

FT on Wed/ Thurs

This is the latest twist in a tale that will have cybernuts happy again that Temask and GIC always losing money.

Juz six months ago Xiaomi was valued at US$100bn after getting into trouble a few yrs ago: Xiaomi’s IPO will make anti-PAPpyists frus

Then a few months back, it became worth US$70bn: Xiaomi IPO: Why cybernuts will be happy again

Oh and Xiaomi has juz launched an IPO to raise US$6.1bn (amended from US$6bn). It had planned to raise US$10bn but the cancellation of its Chinese depositary receipts issuance made that impossible.

Whatever, the cybernuts will never accept that Temasek and GIC made money on this investment. The changes in the valuation reflect the difficult of valuing an unlisted investment, especially a tech company.

Xiaomi IPO: Why cybernuts will be happy again

A few yrs ago the cybernuts were celebrating the purported losses that Xiaomi were costing GIC and Temasek. (Btw, interesting that so called patriotic S’poreans, think tax-dodging Oz resident Oxygen and S’pore-based Phillip Ang  love to celebrate losses that our SWFs make: maybe taz why they are cybernuts? What do you think?)

But they were silent when earlier this yr when Xiaomi was great again: Xiaomi’s IPO will make anti-PAPpyists frus.

Now that the IPO valuation will be US$70bn and not the mooted valuation of US$100bn, expect the cybernuts to point out that Temask and GIC lost money.

With enemies like this, the PAP doesn’t need friends. Sad.

GIC invests US$1.3 bn in Vietnam

Vingroup’s Vinhomes has got GIC to invest US$1.3bn from GIC as Vinhomes prepares for Vietnam’s biggest ever share sale or IPO.

Vinhomes is the property arm oif Vingroup, a conglomerate. Property in hot in Vietnam especially in Ho Chi Minh City where Vinhomes is a big player.

Magic: Saudis joining Temasek/ GIC deal

FT reported that the Saudi Public Investment Fund was is in talks to invest as much as U$400m in Magic Leap at a $6bn valuation even though the start-up has yet to even put one of its augmented reality glasses on the market. Temasek invests in Magic

DoorDash has raised $535 million from SoftBank’s Vision Fund, GIC of Singapore and Sequoia Capital for a $1.4 billion valuation. (Recode)

 

Xiaomi’s IPO will make anti-PAPpyists frus

Xiaomi is laying the groundwork for its planned float in the second half of this yr as it appoints banks for a planned US$100bn IPO.

This make make our anti-PAPyists who are PRC lovers bang their balls really hard

It wasn’t that long ago when anti-PAPpyists (nutty and sane) were KPKBing that both our SWFs lost billions after investing in Xiaomei: http://www.theindependent.sg/gics-and-temaseks-investee-company-xiaomi-lost-40-billion-in-value/

Bear in mind that the above piece was not written by a cybernut but by someone who while sane didn’t have a clue about investing.

Xiaomi, which was valued at more than US$45bn in its last funding round three years ago, went through a difficult period last year that burnt through its cash. But it appears to have turned a corner in the middle of last year.

(FT a few days ago)

FT went on that the co made a:

significant recovery from January last year, when a humbled Mr Lei wrote in a memo posted on his WeChat account and on Facebook: “A few years ago, we rushed too fast, achieving a miracle in the history of modern business growth, but we also overspent a portion of our growth. We must slow down and earnestly learn from our mistakes. Prevention is better than having to fix things later.”

Khaw blaming Dr Goh for SMRT failings?

How can Khaw say we were poor money 30 yrs ago?

Thirty years ago, Singapore’s per capita GDP was about $16,000. Last year, in 2016, it has grown more than four times to about $73,000….So when there are people who criticise the North-South and East-West Lines on why we did not do this and that, we were simply short of cash.

Khaw

In 1981, 36 yrs ago, we had so much reserves because of consistent budget surpluses that Dr Goh Keng Swee decided to set up GIC to better manage the returns on the reserves. (Btw, Goh was no fan of the MRT system. He wanted buses.)

Is he implying that Dr Goh, the then PM of the day, one Harry Lee, and the cabinet decided to prioritise overseas investment returns over the MRT system? Is he also saying that the money in the reserves stashed away then were better deployed building a Great MRT system?

Khaw must be punch drunk after taking too many head blows because in defending SMRT, he’s telling us that the then leaders prioritised surpluses i.e. reserves, over infrastructure. Until his latest comments, the official narrative was that we could have surpluses (reserves), and good infrastructure and that the founding leaders achieved both in their wisdom. Now Khaw is saying that the official narrative is BS, and that the money that went to GIC to manage should have been used to make a Great MRT system, not one that is braking down 30 yrs later.

Separately as Chris K pointed out

GDP per capita had grown more than 4 times in 30 years means the govie has 4 times as much tax revenues as 30 years ago. If “we were simply short of cash”, then the govie is not spending enough for the transportation system to keep up with the size of the economy.

Is Khaw, blaming the other Goh and PM (then DPM) for not spending $ in the 90s?

I’ll leave the last word  to a M’sian PR working here (he married local so as to get HDB flat)

30 years ago might have been short, but since then fiscal surpluses have been close to 10pc of GDP a year by IMF accounting. See this is the problem, train investments come out of the budget but land sales get squirreled away unseen. And we pretend we are poor… So easy to invest in a massive investment portfolio, so hard to invest in your own infrastructure. This fiscal dinosaur begs to be made extinct.

Related posts

SMRT: The cock that Khaw talks

Fat cats need help

P&G mgt reminds me of the PAP

SMRT: Why Desmond must go

PAP has lost “output legitimacy”

GIC into margarine? And teaming up with Jack Ma?

FT reported on Friday that on Thursday, KKR, the giant US buyout firm, and GIC were reportedly coming together to pursue a £6bn bid for Unilever’s spreads business which includes brands such as Flora and I Can’t Believe It’s Not Butter. “KKR and Unilever declined to comment. GIC didn’t respond to a request for comment.”

Unilever wants to sell its spread business to focus on foods products with better margins.

Other private equity groups are planning to bid but I’m sure that TRE cybernuts will say that this is another bad move.

Then there’s a deal involving Jack Ma.

Yunfeng Financial Group backed by Alibaba billionaire Jack Ma (via Ant group), agreed to buy the Asian unit of Massachusetts Mutual Life Insurance Co which offers death benefits and annuities.

The buyer will pay HK$13 billion (US$1.7 billion) for Hong Kong-based MassMutual Asia Ltd, with about 60 per cent of that sum in cash, and the rest in Yunfeng stock, the seller said on Thursday in a statement. GIC and Ma’s Ant group are also buying into the deal.

China got point that Temask model “undesirable”?

FT reports that China has tot about and now rejects the S’pore model for state-owned enterprise reform. FT says, China “turns away from Temasek-style effort to insulate state companies from politics.”

Seems the State Assets Supervision and Administration Commission thinks that

promoting the Temasek model would reinforce an undesirable trend in China’s economy towards “fake” investment that generates profits by shifting money between existing assets without generating new economic activity, Caixin reported.

What can I say?

— Given that according to the Bocconi University, Sovereign Investment Lab, our  GIC and Temasek together carried out last year 62 deals globally worth US$17.9bn, accounting for 39% of total deals and 45% of investment value.

— But as Chris K points out GIC’s and Temasek’s risk adjusted returns are in line with other SWFs.

So does the hyperactivity benefit anyone except the counterparties anf our SWFs’ advisers?

What do u think?

 

 

 

Talking cock about Return Our CPF

Cybernuts, from Mad Dog Chee to Philip Ang, regularly point out GIC’s and Temasek’s “losses” as evidence for the real reason why the PAP administration intriduced the “Minimum sum” scheme and CPF Life: Temasek, GIC lost money, resulting in a shortfall of funds if CPF can be withdrawn at 55.

I’ll quote two of the heloos of the cybernuts to show that the state can refund everyone’s outstanding CPF balance.

Uncle Leong, of fake analysis fame, points out

Amount due to CPF members is $324.2 billion

According to the Department of Statistics’ Monthly Digest of Statistics – the Amount Due to (CPF) Members is $324.2 billion as of October, 2016.

(Yes I double checked to confirm that he wasn’t faking this.)

So does state have the $ to refund $325bn ++?

Chris K (no cybernut and an unwilling hero of the cybernuts) recently pointed out on FB that looking at reserves as unencumbered assets – i.e. assets minus liabilities or net assets, a term used by Tharman and in the constitution when calculating the net investment return contribution, the ball park numbers are

MAS: $40bn,

Temasek: $220bn,

GIC: $290bn

And this excludes the past reserves still sitting in the various Fifth Schedule entities like EDB and etc LTA.

Still think got no money to repay yr CPF?

So in an alternative universe when Dr Chee becomes PM later today, with a two-thirds majority in parly, he can tell president Yaacob to allow him to draw on the reserves and return our CPF. He will tell President Halimah

I have the mandate of the people. What do u have? How many S’poreans voted for u? None because u won by default.”

Sign or I’ll pee on u and let the mob into the Istana.

 

She signs and when everyone gets their money back, the lies the cybernuts tell will be exposed.

 

LKY talked cock on UBS/ Ang mohs that really invest for long term

GIC’s sale of at a loss of part of its stake in UBS reminded me that one Harry Lee boasted that S’pore was even more long term than Buffett: it had a 30 yr horizon. Well he said that in 2007 or 2008 after GIC bot UBS and Citi and Temask bot Barclays (sold) amd Merrill Lynch (disappeared), so it turns out he was talking cock: like on being a good friend of China? He was a running dog of the US going by the quality of the US crowd versus that of the PRC crowd at his funeral.

Now this is serious long term

— Jardines (controlling shareholder of Hongkong Land where the land in Central now resides) first bought freehold land in Central in 1901, and

— HSBC has owned its nearby site since 1866.

And that’s nothing. The Duke of Westminster has properties in central London dating from the 17th century.

What Mad Dog Chee doesn’t say about GIC’s UBS investment

The anti-PAP cybernuts have been circulating Mad Dog’s “analysis” about GIC’s investment in UBS on social media.

What he doesn’t tell S’poreans is that when the deal was announced, the shareholders of UBS especially the Swiss retail investors were publicly complaining to the int’l and Swiss media that the deal was a sweet deal for GIC, short-changing them. They wanted a rights issue which they didn’t get and which they were really grateful when the shares tanked. They got on their knees and thanked mgt.

Why liddat Dr Chee? It’s an inconvenient fact that doesn’t fit yr “PAP are incompetent”analysis? Or u didn’t know? That blur isit?

Yes, GIC got the UBS investment wrong. But I didn’t hear Mad Dog or other anti-PAP activists, or cybernuts pointing out that it was a bad move at the time.

Dr Paul, can u and Wee Nam increase the dosage? Triple it at vey least. Maybe time to try something new? His relapses are getting a bit too frequent. Maybe call in Dr Ang Yong Guan to help? He specialises in nut cases doesn’t he?

S’pore Inc: Ownself pay ownself

CapitaLand Commercial Trust Singapore’s First and Largest Commercial REIT 8 – 9 November 2016 Presentation for investor meetings in Hong Kong

Click to access 20161107_172614_C61U_P2DBY8KUFMS4XEEF.1.pdf

Slide 14 showed that Top 10 tenants contribute 36% of monthly gross rental income

From the perspective of Ownself Pay Ownself

3rd was GIC — 4%

5th was StanChart — 3%

6th was CapitaLand — 3%

10th was EDB — 1%

For the record Temasek owns 40% of CapitaLand and CCT, and about 20% of StanChart. But be be fair HSBC is the second biggest tenant of CCT contributing 4%.

GIC rushing in after Temasek got taken to the cleaners

Second time lucky? S’pore Inc trying its luck (with our money) at the roulette wheel again?

I’ll let the FT tell the tale:

GIC, the sovereign wealth fund of Singapore, plans to buy a large minority stake in Irish telecoms group Eir, in a deal that is expected to value the former state monopoly provider at more than €3.3bn.

And

The Eir deal would mark the second time in less than a decade that a Singaporean investment fund has taken an interest in Eir, which has been traded between investors and debt holders in a convoluted series of deals and flotations over the 16 years since it was privatised.

In 2012, the senior lenders of Eircom took control of the Irish group following a restructuring of its €4bn of debt, which slashed about €1.7bn of borrowing from its balance sheet but also wiped out the previous shareholders including Singapore Technologies Telemedia (STT) — owned by Singaporean investment arm Temasek — and all the more junior levels of debt holders.

Reminds me of “Ever tried. Ever failed. No matter. Try Again. Fail again. Fail better,” Samuel Beckett.

Temasek and Eircom

NIR, Budget untruths, & the President

This (on Ong Teng Cheong possibly wanting to screw S’poreans like, as perceived,the workers were screwed when he was NTUC chief) got the a reader, Wil, asking

A Qn: The NIR used for the budget is projected returns. If the projected returns did not materialize, then how? It seemed like insurance agent selling us a policy on projected returns which never materialize.

Am I comprehending the NIR correctly? Because this seemed to me that there might be hefty tax increase down the road if the projected returns did not materialize. This will also affect all the social spending currently on Singaporeans

I asked Chris K to answer and he gave the following reply

Reply to Wil as request by atans1.

Your reading of the Constitutional NIR rule is correct – the NIR Contribution is calculated on the expected long term real rate of return (LTROR) on the government’s net assets (assets in excess of its liabilities). Pls note it is REAL returns we are talking about – that is the actual dividends and market valuation of the net assets minus the inflation rate. Therefore not all returns are spent. Then the rule limits the spent to 50% – therefore more than half of the actual or nominal returns are re-invested. Again pls note this is nothing unusual, Norway’s GPF and university endowments permit up to 100% of the returns to be spent.

——————————

[Side box comment]

Own President Check Ownself

Chris later added this further explanation which helps explains why the PAP administration wants to fix things so that when it’s in power, the president is its preferred candidate for the post.. Imagine if Tan Jee Say was the president.

I should mention that there is a certain ownself check ownself in how they determine the NIR contribution. The asset managers in GIC, MAS and Temasek make an assessment of the expected real LTROR which the government submits to the President for his approval. It begs the question how the President is able to come to a decision to approve the expected real LTROR without referring the matter back to the government if he disputes the assessment. So the issue goes back to the asset managers who indirectly works for the government. Conflict of interest is obvious. Should no agreement with the President is attained, the NIR rule permit the use of the reported real LTROR instead of the expected real LTROR.

————–

Certainly on a year to year basis, GIC, MAS and Temasek may suffer losses or as you say the returns do not materialise. But again pls note we are talking of long term returns of 20 years or more – an occasional bad year like 2015 is not going to cause a significant dip in the LTROR and we must also be mindful that inflation has fallen thus increasing the real LTROR or offsetting any fall in real LTROR. Besides a dip in the reported real LTROR simply means the expected LTROR will be revised downwards for subsequent budgets. So there is a buffer built into the NIR framework which means the available amount of spent will fall.

As for tax increases, I do not see any reasons based on the NIR alone (although I see very good reasons for further tax increases on the top 1% to 5%). Any fall in the real LTROR may decrease the NIR Contribution but this decrease is offset by the fact that more than 50% of the LTROR is reinvested, increasing the reserves and offsetting the fall in the NIR Contribution.

Most importantly that the Budget as presented to the public is not IMF compliant – that is to say the true fiscal position is obscured from the public (but not to the IMF since Singapore is subject to the assessments required under Article IV of the IMF constitution). The actual fiscal position are far more in surplus than the government revealed. in 2015, the government presented a budget deficit equal to 1.2% of GDP but the true fiscal position is a surplus of a surplus of 1.7% of GDP. In 2014, the government reports a surplus of 0.1% of GDP while true position is a surplus of 3.9% of GDP. There has been huge differences between the two sets of numbers simply because the government do not reveal “net acquisition of non financial assets” or simply revenues from net sale of land.

This is the reason why the NIR contribution kept increasing despite generally poor global investment returns.

Atans1: apols for mouthful but this is as layman as I can manage. Will write a piece on the budget being non IMF compliant after I read the MPs falling over themselves to debate fiscal sustainability and the likes without knowing what they are talking about

Ong Teng Cheong & the Budget

Sometime back I said that I would blog in greater detail about Ong Teng Cheong’s unhealthy obsession about locking up the reserves. This is as good a time as any to write about the matter because of the Budget and because recently I read this: http://singaporedaily.net/2016/02/11/daily-sg-11-feb-2016/ which left out not so friendly details about the People’s President.

Ong Teng Cheong wanted to lock-up reserves forever and a day. He wanted future generations to press their noses at the blast-proof windows protecting the reserves. They would be able salivate at the reserves but despite their distended, empty bellies, not able to have access to the reserves until the president gave access.

He made this very, very clear when as DPM, he didn’t want any of the interest or capital gains from the reserves to be used by the govt of the day. He wanted the constitution changed for these to locked-up too arguing that the value of the reserves must be preserved. The only way of doing this was to lock up the interest and capital gains. Taz the People’s President for you.

It was one Ah Loong that wanted a more flexible regime of using the returns for the present generations. Ah Loong, of course, got his way and the over the years more and interest and capital gains have been allowed to be used.  The returns on the reserves are being used as an endowment, with the Budget as the immediate beneficiary.

————————-

Related article: The theory and practice of an endowment fund

http://www.theguardian.com/business/2015/jan/01/wellcome-trust-investment-chief-plays-long-game

“I think is predominately a mindset,” says Truell*. “It is a mindset that believes that compounding cash flows over time is the most effective form of investment. It is partly also the mindset of the organisation. I have a board that consists mainly of very eminent scientists who are very empathetic to the view that you make progress over years and decades, not over the next quarter.” Truell is CIO of the Wellcome Trust

——————————————————

This yr, the net investment returns contribution, S$14.7 billion, means that overall Budget position is  S$3.45 billion “surplus”*, amounting to 0.8% of nominal GDP. Economists say this overall surplus position will give the Government the fiscal space to enact off-Budget measures, should the economic outlook deteriorate significantly.

“Without the contributions from GIC and Temasek, there would have been a primary deficit* of almost S$5 billion. This is bigger than the S$2.3 billion deficit* in the post-financial crisis Budget in 2009, and the S$4.25 billion deficit* last year,” said Mr Ng. (CNA)

(*As defined by the S’pore govt, not the IMF. By IMF standards, S’pore’s surpluses from its Budgets amounting to 7% of GDP: not peanuts.)

Net investment returns contribution over the years. (Source: Ministry of Finance; Infographic: Linette Lim) CNA

All these monies would have been denied to S’poreans by the People’s President. No wonder the nuts in TRELand adore and worship him: he’d have screwed their handworking fellow S’poreans.

Finally, readers may be interested in these excerpts about GIC’s mgt of the reserves from a Bloomberg article that appeared in 2014

GIC has moved away from the endowment model of strategic asset allocation it had followed for a decade. In the process, it’s become one of the world’s most aggressive sovereign wealth funds.

…

As the new strategy came into effect in April 2013, GIC shifted away from its traditional asset-allocation strategy to a more active approach. Its fund managers can now deviate from GIC’s portfolio if there’s an opportunity to beat the market.

“The way of generating returns through holding diversified assets and just kind of waiting would not work well anymore,” CIO Lim says.

…

In GIC’s early years, the government ran it as a rainy-day fund.

“My cardinal objective for GIC was not to maximize returns but to protect the value of our savings and earn a fair return on capital,” Lee said on the occasion of GIC’s 25th anniversary in 2006.

Five years later, on GIC’s 30th anniversary, in his last public speech as GIC chairman, Lee urged the fund to take bold, strategic and forward-looking decisions.

“As GIC grows larger and more established, the impetus to follow conventional practices will grow stronger,” he said at an anniversary dinner. “This could lead to mediocrity.”

In 2012, GIC began a major review of its investment strategy — only the second such examination since the fund’s inception.

http://www.bloomberg.com/news/articles/2014-12-08/singapore-sovereign-fund-bets-big-on-trophy-real-estate

 

 

 

 

 

Bloomberg agreed with Roy in 2014

[Update on 27 March at 6.20am: A reader has given the new link http://www.bloomberg.com/news/articles/2014-12-08/singapore-sovereign-fund-bets-big-on-trophy-real-estate so I’ve amended the article accordingly. ]

We know that Roy Ngerng talks cock about GIC managing CPF monies. Govt says so and so do independent experts like Chris K (once a TRE:and super hero and financial gguru, now demoted to PAP IB member).

But this is what Bloomberg wrote in 2014 when Roy was KPKBing about PM stealing our CPF monies

Like investors of all stripes, GIC is fighting against the tide of slowing global growth and low interest rates.

The city-state’s citizen population of 3.3 million is aging fast; the median age will rise to 47 years by 2030 from 39 in 2011, according to the government’s National Population and Talent Division

What’s more, GIC is under demographic pressure as manager of part of the Central Provident Fund, the savings plan that is meant to provide retirement income for Singaporeans.

Now this is the strange thing. The link to the article http://www.businessweek.com/news/2014-12-08/singapore-sovereign-fund-bets-big-on-trophy-real-estate#p1  goes somewhere else, not to the article. Wonder why?

 

Three cheers for the PAP

(Or “Why our GLCs work”)

Talking of the UK (where remember LKY and Goh Keng Swee and Toh Chin Chye- the trinity- studied. I’d describe Lim Kim San, from Raffles College, now NUS, as their archangel who did the work they ordered):

There were significant efficiency improvements in nationalising the postal system and the telegraph network, but the nationalisations of the 20th century were much less successful. This was in part due to the rise of trade unions and the move towards a fully democratic political system. While nationalised companies were left to be minded by technocratic-minded officials in the 19th century, politicians with their eyes on elections started fiddling with them in the 20th. Whenever politicians needed tax cuts to win elections they tended to hack back investment in state-owned firms. They also had a free hand to bloat their payrolls in order to help governments achieve full employment in the economy overall, protected by a system of tariffs and monopolies designed to shield them from competition. And trade unions started to demand excessive pay rises and oppose efficiency improvements, knowing that the state, as owner, would always pay the bill to avoid a fuss at election time.

http://www.economist.com/blogs/economist-explains/2015/12/economist-explains-1

Democracy? What democracy? Unions fighting for workers? What are they? Three cheers for elitism.

But this also rings true: parastatals like national airlines tend to be a handy way for government officials to dish out jobs to cronies. Neither the beneficiaries nor the benefactors of this illicit set-up want to ground the gravy plane.

(From anotther Economist blooger)

HoHoHo Do Temasek, GIC know their private equity bills?

We obviously don’t know how much the private equity firms charge Temasek and GIC or if they offer us value for money (like our millionaire ministers like RI boys Yaacob and Hng Kiang). For this thank the sheep 7o%: but do PM, Tharman, the president, and our SWFs know? The Auditor-General should not be wasting his time on helping to”fix” the Worthless Party (Tin Pei Lin type social wotkers, pretending to be Oppo politicans because of MPs get paid a lot more than social workers).

NYT Dealbook reports that even big US investors have problems calculating the costs (and benefits) of investing in PE funds.

CALPERS REVEALS PRIVATE EQUITY FEES AND PROFITS …, the California Public Employees’ Retirement System disclosed for the first time that it had paid $3.4 billion since 1990 to big private equity firms, including Carlyle, Blackstone and Apollo – an announcement that “could help to pave the way to more transparency in the private equity industry,” Alexandra Stevenson writes in DealBook. Calpers also said private equity firms’ investments generated $24.2 billion in profits over the same period, according to its new data-collecting program, called Private Equity Accounting and Reporting.

Pension funds across the country have expressed concerns about high private equity fees, which typically include a management fee of 1 to 2 percent of assets and about 20 percent of profits. But many firms also charge fees related to transactions, monitoring investments and legal work. What Calpers didn’t disclose was the breakdown of these fees, said J. J Jelincic, a member of the Calpers board. “We certainly know more than we did before,” Mr. Jelincic said. “But it’s not the complete story yet.”

Calpers has been working to streamline its external investments, announcing plans to liquidate $4 billion in hedge fund investments and to get rid of half of its external money managers. But Calpers said it wouldcontinue to invest in private equity, which had “the highest net returns” in its portfolio, according to Ted Eliopoulos, the chief executive of Calpers. The pension fund’s private equity investments have yielded a return of 11.1 percent since 1990, compared with a 9.4 percent annualized total return across the Standard & Poor’s 500-stock index over the same period, Ms. Stevenson writes.

 

StanChart: Did you know?/ Glencore: Sinking fast

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.

http://www.bbc.com/news/business-34380490

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

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

Glencore

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.

http://www.bbc.com/news/business-34208070

StanChart

FT reports that according to Nomura, half of StanChart’s Asian revenue in the first half of 2015. More https://atans1.wordpress.com/2015/09/10/hohoho-two-brokers-views-on-stanchart/

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?

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.

http://www.theguardian.com/business/nils-pratley-on-finance/2015/aug/12/glencore-world-of-big-mining-agog-at-huge-fall

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. https://atans1.wordpress.com/2011/04/15/gic-has-a-winner-with-glencore/

Update on @0August :

US marshalls target Harry’s and Ho’s banks

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.

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

https://atans1.wordpress.com/2012/10/02/stanchart-troubles-never-come-singly/

https://atans1.wordpress.com/2014/09/04/stancharts-looking-dysfunctional-problem-for-ang-moh-banks/

What Citi and UBS pleaded guilty to

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

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). https://atans1.wordpress.com/2011/01/17/mm-got-it-right-temasek-got-it-wrong/

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

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.

• REUTERS

GIC: Rubbing salt into S’poreans’ CPF woes

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

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. 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 Lim talks rubbish/ Olam helps African farmers

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

— 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.”

(http://www.economist.com/blogs/baobab/2013/12/ghana)

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

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)

https://atans1.wordpress.com/2013/07/02/time-to-worry-about-temaseks-strategy-on-chinese-banks/

BTW

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

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

http://www.pimco.com/EN/Insights/Pages/A-Man-In-The-Mirror.aspx

Citi: Last dog in the race

http://www.businessweek.com/articles/2012-10-18/a-daunting-to-do-list-for-citigroups-new-ceo#p1

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

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.

Update on Citi: New Citi, old Citi

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

http://dealbook.nytimes.com/2012/08/22/the-new-citigroup-isnt-your-fathers-citicorp/?nl=business&emc=edit_dlbkam_20120823

GIC: Buying while others selling

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.

http://zeenews.india.com/business/news/finance/foreign-investors-press-sell-button-on-reliance-stocks_56354.html

“30-yr” GIC investment Citi almost junk

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?

Update

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.

Trying to con GIC?

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.

http://www.reuters.com/article/2012/06/19/india-gvk-idUSL3E8HJ1UP20120619

Tricky buggers these Indians.

Role Reversal for Bank of America and Citigroup

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.

NEW YORK TIMES

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

Citigroup’s down 82%

http://dealbook.nytimes.com/2012/03/16/how-wall-street-has-fared-after-bears-fall/?nl=business&emc=edit_dlbkpm_20120316

Citi cont’d

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: https://atans1.wordpress.com/2012/03/14/citi-falls-fed-test-one-of-only-four-that-failed/

Citi falls Fed test: one of only four that failed

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

(Or “GIC may have bot another dog”)

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

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

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

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

GIC now has over 5% of Bunge.

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

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

GIC: A dog of an investment

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.

http://www.guardian.co.uk/business/2012/feb/22/baa-loss-debt-interest-payments

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

 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?

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?

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

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.)   

GIC has internal communication problems?

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

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?

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

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

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.

 

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

(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

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 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

More than 50% of its profits come from emerging markets juz when emerging markets are losing their attractiveness to global investors.

Given Cit’s record of losing serious money by jumping into markets late (think sub-prime, and lending to finance LBOs, US property (in the 80s) and Latin America (in the 80s too), S,poreans should be concerned., given GIC’s 5%(?) odd stake in Citi,

Article

The Fed notified financial institutions that passed a second round of stress tests that they can begin returning money to their shareholders, The results are confidential but already some US banks are saying they will raise dividends this year. Among them are Citi rivals JPMorgan and Wells Fargo. Citi says that only in 2012, will it consider raising its dividends, It got a lousy rating?

And I now know why the executive director of GIC is looking to increase US exposure.

Lesson for our SWFs

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

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 their new book, “Red Capitalism: The Fragile Financial Foundation of China’s Extraordinary Rise” (John Wiley & Sons), Carl E. Walter and Fraser J.T. Howie paint a troubling portrait of China’s economy and its financial system. Despite the nation’s mind-boggling growth and images of gleaming skyscrapers and luxury cars, the authors say China’s growth model is flawed and fragile, and they warn about substantial risks accumulating in its banking system.

Q&A

Backgrounder: S’pore Inc has big bets on China

Citibank: What our MSM doesn’t tell us

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

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

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.

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

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?

Property sales also fund our SWFs

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]

How we fund our SWFs

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

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.

http://dealbook.blogs.nytimes.com/2010/10/20/quote-of-the-day-bush-on-the-700-billion-bailout/

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

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

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

https://atans1.wordpress.com/2010/10/01/gics-loss-on-ubs-and-citi-investment/

https://atans1.wordpress.com/2009/11/24/where-value-investing-can-go-wrong/

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?

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.

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

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?

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/

Temasek GIC ignoring Qatar’s ideas?

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

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

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

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*)

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

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 https://atans1.wordpress.com/2010/05/21/temasek-ignoring-mm-iii/

GIC: UBS remains in limbo

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

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 https://atans1.wordpress.com/2009/12/26/where-gic-and-temasek-gets-their/

“Korea’s total foreign exchange reserves are about $280bn so it is only putting about 10 per cent into KIC*,” says Mr Kalb**. “Compare that with Singapore where the central bank keeps $150bn in liquid reserves and yet [of the country’s two SWFs] GIC is tasked with managing $250bn and Temasek $100bn.” $ = US$

*Korea Investment Corporation:  (Korea’s SWF)

** KIC’s CIO

Our SWFs: Another question our MPs should be asking

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

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.

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

https://atans1.wordpress.com/2010/02/09/why-my-obsession-with-tlcs-in-china/

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

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

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

https://atans1.wordpress.com/2010/04/18/motivating-the-elite-learning-from-n-korea/

Our SWFs: Learning from the Arabs II

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?

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

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

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

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.

m/2010/03/15/our-swfs-what-our-mps-are-not-asking/

FYI

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

Maybe MM Lee shld take a lesson from N Korea, even though S’pore is not N Korea    https://atans1.wordpress.com/2010/03/19/our-swfs-staff-shld-be-thankful/

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?

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.