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Archive for the ‘Temasek’ Category

HoHoHo: Chinese banks

In Banks, China, Temasek on 05/05/2016 at 10:10 am

Mid-sized Industrial Bank reported some of the highest levels of investment receivables in its first-quarter results. The bank held Rmb2tn in investment receivables as of the end of March, 36 per cent of its total assets and equivalent to the size of Singapore’s gross domestic product last year.

(FT)

And remember we hold shares in  three out of the four biggest banks

The suspicion is that Chinese banks are owning up to just as much bad news as they can afford while keeping reported earnings stable. It’s not clear who they are trying to fool. Shares of the big five trade at between 70 and 80 percent of book value, suggesting investors wised up long ago. The latest trickery will only make them more cynical.

http://blogs.reuters.com/breakingviews/2016/04/29/chinese-banks-stealth-clean-up-fools-nobody/

UBS bearish that StanChart has turned a corner

In Banks, Emerging markets, Temasek on 27/04/2016 at 10:32 am

It’s Shares jump despite fall in profit

Standard Chartered shares surged 10% in London after the bank — which generates almost three quarters of its revenue from Asia — reported a surprise decline in loan impairments and capital increased more than some analysts estimated.

Pretax adjusted profit fell 64 per cent to US$539 million (S$729 million) for the first three months of 2016, from US$1.5 billion a year earlier, said the London-based bank in a statement yesterday. Losses on bad loans fell 1 per cent to US$471 million in the quarter, well short of the US$650 million of impairments estimated by Mr Chirantan Barua, an analyst at Sanford C Bernstein. 

But there are still huge problems.

Revenue dropped 24 per cent in the quarter to US$3.35 billion, as income from every business unit declined.

http://www.bloomberg.com/news/articles/2016-04-26/standard-chartered-profit-drops-64-as-revenue-misses-estimates

UBS expects the share price to fall to 430p within 12 months.

With many funds short or underweight at the start of the year, commodity prices regaining some poise, EM equities rallying and EM funds seeing a return to inflows, a rally is directionally easy to rationalise.

But the StanChart rally has happened against a ~60% fall in consensus profit forecasts for this year and 30% decline for next. Our estimates are unchanged and so is our view: we see great businesses within StanChart – predominantly Transaction Banking, Financial Markets and bits of Retail – but we think the headwinds of de-risking, deleveraging, and flat and low yield curves will combine with elevated loan losses to make life particularly difficult near term (we forecast a loss for this year), leaving the 8% ROE target for 2018 out of reach.

 

 

HoHoHo, Soros bearish on China

In Banks, China, Temasek on 25/04/2016 at 10:06 am

After StanChart, thetr are three other Chinese other monkees on Temasek’s back. Remember we have big stakes in three of China’s big 4 banks.

As China’s Growth Slows, Banks Feel the Strain of Bad Debt Chinese lenders feel rising pain from souring loans in troubled industries – even as they face pressure to keep local companies afloat.

NYT Dealbook

Soros bearish on China

George Soros is warning markets that China’s financial system is at risk and the rise in credit will be the downfall for world’s second biggest economy.

Speaking at an Asia Society event in New York on Wednesday, Soros said the similarities between the credit markets in China “eerily resemble” to those of the United States in 2007 before the financial crisis.

Recent stimulus packages in China have seen sharp rises in asset prices – namely in the housing and construction sector, but Soros believes these have been fueled by excessive lending to underperforming industries.

“Most of the money that banks are supplying [in China] is needed to keep bad debts and loss-making enterprises alive,” Soros said.

Read more: George Soros Worried about China’s Financial System | Investopedia http://www.investopedia.com/articles/investing/042116/george-soros-worried-about-chinas-financial-system.asp#ixzz46i1T5WmU
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Monkey still on Temasek’s back

In Emerging markets, Temasek on 13/04/2016 at 10:22 am

The real monkey bothering Ms Ho. HoHoHo

Standard Chartered Said to Plan Sale of $4.4 Billion in Asian Assets Standard Chartered is seeking to sell at least $4.4 billion of assets in Asia, Bloomberg reports, citing people with knowledge of the matter.

NYT Dealbook

NIR, Budget untruths, & the President

In GIC, Temasek on 29/03/2016 at 1:22 pm

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.

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[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.

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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

HoHoHo: StanChart gives more pain

In Emerging markets, Temasek on 25/03/2016 at 6:39 am

In London, StanChart fell 7.8% after after Australian peer ANZ warned of a further deterioration in credit quality.

FT reports

“Whilst we believe to some extent ANZ’s issues are company specific, ongoing commodity price weakness is likely to translate into higher losses for the sector,” said Macquarie. Oil and metals producers account for about 6 per cent of StanChart’s lending book.

More bad news

Separately, Morgan Stanley advised clients to sell into StanChart’s 25 per cent rally from February lows.

Lower-for-longer interest rates, contracting Asian export volumes and pressure on Hong Kong mortgages as lenders compete for low-risk assets make StanChart’s long-term targets look “heroic”, Morgan Stanley said, adding: “We see revenue as the next challenge and without deeper cost cutting we struggle to see how the 8 per cent 2018 return-on-equity guidance can be met.”

HoHoHo: Next bet for value investor

In Energy, Temasek on 24/03/2016 at 10:03 am

Will Temasek try its luck and put our chips here? What will Buffett do?

One reason why the coal industry is in such a bad shape is that US utilities are using more natural gas which is cheaper than thermal coa.

NYT Dealbook on the coal industry:

BANKS PULL FINANCING FROM COAL INDUSTRY Wall Street’s retreat from the coal industry is an ominous sign for a sector already in decline, Michael Corkery writes in DealBook. JPMorgan Chase said it would no longer finance new coal-fired power plants in the United States or other wealthy nations. Bank of America, Citigroup and Morgan Stanley have made similar decisions. At the same time, Peabody Energy, the world’s largest private-sector coal company, said it might have to follow three other large coal companies into bankruptcy.

Coal has had periods of boom and bust before, but some say this may be a permanent shift for the industry that helped drive Wall Street profits during the 19th and 20th centuries.

Banks say they are trying to do their part against climate change, but the retreat is driven by a more basic reason: Lending to coal companies is risky and could prove unprofitable. Coal companies are under pressure from less expensive energy sources and tougher regulations. As a result, even the most secure loans are off limits for many banks.

Even hedge funds and private equity firms, usually eager to pounce on companies in distress, do not have the stomach for the coal industry.

In the oil industry, however, investors are snapping up debt and equity from troubled companies, in expectation of a rebound.

HoHoHo: Chinese banks have more problems

In Banks, China, Temasek on 16/03/2016 at 9:29 am

Funny that we don’t hear much in ST nowadays that Temasek has big, big stakes in Chinese banks. http://www.temasek.com.sg/portfolio/portfolio_highlights/majorportfoliocompanies.

Last yr, ST was boasting

http://www.straitstimes.com/business/companies-markets/temasek-raises-stake-in-chinese-bank-icbc

http://www.straitstimes.com/business/temasek-raises-stake-in-icbc-in-vote-of-confidence-after-rout

But maybe, ST’s cottoned on that Chinese banks have problems, big problems

NYT Dealbook reports

“CHINESE BANKS SWAP DEBT FOR EQUITY A new approach to managing China’s corporate debt burden offers temporary relief for banks, but spells difficulties for the country’s economy, Keith Bradsher reports in DealBook.

Deeply troubled companies are using stock to pay for overdue loans. On Thursday, a heavily indebted Chinese shipbuilder disclosed that it would issue equity to its creditors, instead of repaying $2.17 billion in bank loans.

Banks with stakes in indebted companies are likely to be even more reluctant to shut them down, leaving China with enormous overcapacity in sectors like shipbuilding, steel and cement, hampering growth for years to come.

The strategy has advantages – it would allow companies to cut their debt loads. This could help their credit profiles and keep their businesses running. Bank loan books will also appear healthier, since they can reduce the amount of past-due loans.

However, it could make problems more pernicious as the companies are putting off hard choices like laying off employees or closing operations.

It is still unclear how widespread the strategy has come. The shipbuilder, China Huarong Energy Company, had to disclose the move only because it is listed on the Hong Kong stock market. It is one of dozens of Chinese shipbuilders in financial distress as prices for new ships worldwide have halved in the last two years.”

And there’s another related problem

http://blogs.reuters.com/breakingviews/2016/03/11/china-debt-swap-could-leave-banks-in-capital-hole/

Temasek right to sell NOL

In Logistics, Shipping, Temasek on 10/03/2016 at 10:08 am

FT reported sometime in January

it was widely assumed that global trade would keep expanding. Until recently, this assumption did not seem unreasonable. In the decade before 2008, global trade rose by an average of 7 per cent a year, faster than global GDP growth, because countries such as China were booming and western businesses were creating a web of cross-border supply chains.

History, however, does not unfold in predictable ways. As the World Bank described in a sobering report last week, global trade growth has slowed down sharply in recent years to around 3 per cent, or roughly the pace of global GDP expansion, and it is slowing further now.

How Maersk ate NOL’s lunch

In Logistics, Shipping, Temasek on 09/03/2016 at 11:36 am

It kept ordering bigger ships. These ships when operated drove down operating costs, allowing Maersk to undercut NOL and orher shipping cos. Bit like employers using FTs.

Qns for Keppel, SembCorp Marine

In Energy, Temasek on 24/02/2016 at 2:08 pm

FT’s Nick Butler  had 4 questions for the oil majors’ results season:  where they spintheir annual results, declare dividends and reveal strategy updates. These are useful questions for Keppel and SembBorp Marine except the second question should be about their vanalysis of their clients projects. And for Temasek too. And useful guide when asking questions about the small cap offshore marine stocks: stocks like Ezra amd Swiber. Btw, it’s rumoured that Temasel officials used Nick Butler’s questions when they last met Keppel and SembCorp Marine executives.

First, did you foresee the fall in prices across the energy sector in the past two years? I don’t think anyone can answer that with a yes, which leads inexorably to the supplementary question: if not, why not? This is the question the Queen asked a group of economists after the financial crash and the 2008 downturn. It seems she is still waiting for a clear answer.

Second, what proportion of your producing assets and projects under development requires an oil price above $50 a barrel (or a comparable gas price) to produce a positive rate of return? This is a more complex question but if answered truthfully will expose the extent to which some companies over invested at high prices and will continue to struggle.

Third, what is your strategy if oil, gas and coal prices stay low — say, below $50 a barrel for the next five years? This is the most important question, especially for investors who rely on a secure dividend flow. To the best of my knowledge no energy company has yet explained its strategy, which makes it all the more important that the question should be asked and answered. Any chief executive who says that a long period of low prices is impossible should be retired immediately.

Finally, what do you believe are the most significant advances in technology in the energy sector in the past year and how could they affect your business? What are you doing to make sure you capture the benefits of those advances rather than falling victim to them? The aim here is to extract a clear statement of long-term strategy. Focusing on technology should test whether companies are taking the time to look outside and watching the advances being made on solar and storage; and whether they understand the dramatic scale of the changes that are happening. At the individual level, the question will test whether chief executives are looking ahead at the medium and long-term or simply trying to coast to a well-padded retirement.

HoHo Ho: StanChart’s in a right mess

In Commodities, Emerging markets, India, Temasek on 24/02/2016 at 6:14 am

Shares in Standard Chartered plunged on Tuesday after the Asia-focused bank revealed a $1.5bn (£1.1bn) loss.

http://www.bbc.com/news/business-35639284

The bank will take a $4bn charge on writing down the value of its loans, driven by falling commodity prices and deterioration of Indian markets.

Shares in the bank tumbled by 4% to a record low of 418.7p.

chart StanChart performance

CEO said: “It rips at our soul every time we look at these numbers and we don’t ever want to have to stand up and tell this story again.”

And that’s not all.

StanChart faces accusations over ‘dirty debt’.  It bought a $100 million “dirty debt” from a M’sian bank and used it to demand compensation from the Tanzanian government despite knowing that the loan had been part of an embezzlement scheme, according to claims in a legal row in Tanzania. The debt was originally owed to the M’sian bank by a M’sian company, Mechmar.

Update qt 7.00am: HoHoHo woild endorse this spin Sir John Peace, Standard Chartered’s outgoing chairman, said: “While our 2015 financial results were poor, they are set against a backdrop of continuing geo-political and economic headwinds and volatility across many of our markets as well as the effects of deliberate management actions.”

Don’t blame us. World’s in bad shape. We juz reflecting it.

HoHoHo: Will Temasek slip on oil patch?

In Energy, Temasek on 13/02/2016 at 5:31 am

investors and lenders have laid the groundwork for the rebound – buying assets in fire sales and making new loans. But even opportunists are still uneasy. Many investors fear they could be too early if they jump in now – they had already been burned by forecasts that predicted oil would recover last year.

Remember tthis investment?

NYT Dealbook reports

LOW OIL PRICES AND A RECKONING ON DEBT Energy executives and their bankers are preparing for a prolonged downturn that could change the energy industry in a way not seen since the turmoil of the late 1990s gave rise to mega-mergers like Exxon Mobil, Clifford Krauss and Michael Corkery report in DealBook.

Crude prices have plunged more than 70 percent over the last 20 months, but until recently, companies were able to ride out the slump using hedges to sell their oil for more than the market price.

These hedges have expired in recent months, leaving oil companies low on cash and unable to pay their debts. They are also realizing that a recovery in oil prices is at least a year away – too long for many companies to hold out.

If prices hold at such low levels – oil traded near $28 a barrel on Tuesday –as many as 150 oil and gas companies could file for bankruptcy, according to IHS, an energy research firm.

That is a relatively small slice of the industry, but hundreds of other companies that piled on debt to grow into significant players in the shale oil boom are now likely to be acquired or sell their assets. As much as a third of the oil industry could be consolidated as a result of the downturn.

As losses have mounted, investors and lenders have laid the groundwork for the rebound – buying assets in fire sales and making new loans. But even opportunists are still uneasy. Many investors fear they could be too early if they jump in now – they had already been burned by forecasts that predicted oil would recover last year.

Temase should remember that it already has exposures to the oil patch via Heppel and SembCorp Marine: the bad and ugly, the good 

And think about buying SembCorp. If oil prices recover, it’ll bewnefit from its stake in Marine. If it doesn’t, there’s the other biz.

HoHoHo: Temasek’s dubious achievement

In Temasek on 11/02/2016 at 4:30 am

Standard Chartered is valued at less than less than it was before the financial crisis of 2007/ 2008. Another one of this select club is Deutsche. HOHOHO

Hamish McRae (a former editor of the Economist) offers some encouragement in the Independent. Studying past crises has taught only one certainty, he concludes: “Share prices will eventually bounce back, provided you wait long enough for them to do so.”

HOHOHO

HoHoHo: Won this one

In Temasek on 02/02/2016 at 5:07 am

Olam short failed and maybe guy lost all his money, so starting hedge fund?

Short-Seller Carson Block Launches Hedge Fund Carson Block, founder of the research firm Muddy Waters who exposed accounting problems and wrongdoing at a series of Chinese companies, has started a hedge fund investment firm, a filing with the U.S. Securities and Exchange Commission showed.

NYT Dealbook

HOHONOHO: StanChart’s expected results

In Banks, China, Commodities, Emerging markets, Temasek on 26/01/2016 at 4:24 am

StanChart which suffered the biggest share price falls this year, will announce its results on February 23. Analysts expect it to report an 85%  fall in earnings per share, FT reports.

Last yr it was the second worse performer on FT100, down 47%, I think.

One analyst says there is debate that its business model is fundamentally broken. Another says that its strategic review released in Nov shows that it’s a collection of biz, none of whch cover their cost of capital.

Whatever China and other emerging mkts are in trouble and StanChart is an emerging markets bank. Until these mkts recover, StanChart can only cut costs (Sack more staff from Little India Marina Bay? Move jobs from London and S’pore?) and be more efficient.

HoHoNoHo

Updated at 5.00am

Chart: Troubled EM debt at record high

HoHoHo, PM must be proud

In Banks, China, Temasek on 19/01/2016 at 7:03 am

DBS, StanChart kanna mark by China for gaming the Chinese FX regome:

FT reported last week:

The latest tightening comes after the central bank temporarily suspended some foreign banks in China, including Standard Chartered, Deutsche Bank and Singapore’s DBS, from conducting certain foreign exchange transactions designed to arbitrage the gap between the onshore and offshore renminbi exchange rates.

HSBC is really an old friend of China. It may be the bank of choice for Chaqco and other Mexican drug lords, but it doesn’t game PRC regulations.

Buy Keppel, SembCorp Marine & Sapura?

In Energy, Financial competency, Malaysia, Temasek on 15/01/2016 at 11:48 am

Continuing the theme of buying dogs, commodities and energy …

Forget what the financial equivalent of Goh Meng Seng says (reported here), and buy the two fallen Fab 5 stocks? And M’sian Sapurakencana Petroleum? One of Asia’s leading oilfield services groups, if you don’t know. 

=========================

He’s the journalist equivalent of Goh Meng Seng (three GEs, three different parties, and a declining share of the vote). This FT has in the about same period worked for Bloomberg, MediaCorp, Reuters and now Bloomberg again. Oh and the last time this FT was working for Bloomberg, he and Bloomberg had to pay damages to one of the Lees, can’t remember which.

As Goh Meng Seng is an exemplar of the traditional oppo politican, this FT shows that T can stand for “Trash”.

====================================

There’s deep despair about the oil price as this report from NYT’s Dealbook recounts. But there’s two swallows in the sky:

–Premier Oil has finally agreed to buy all of German utility E.On’s UK North Sea assets in a deal worth $120m (£83m) despite oil trading below US$30,

— Statoil ASA, Norway’s biggest energy company, snapped up a 12% stake in Lundin Petroleum AB to increase its access to the giant Johan Sverdrup field.

The acquisition corresponds to a price per share of about 124 kronor, in line with Lundin’s average price over the past 30 days, according to data compiled by Bloomberg. Lundin shares have dropped about 20 percent since crude started to tumble in mid-2014. Brent oil, the global benchmark, is now trading near $30 a barrel.

“The market situation made it possible for us to secure this position at an attractive price,” Baard Glad Pedersen, a spokesman at Statoil, said by phone. The Stavanger-based company won’t seek representation on Lundin’s board, he said. Bloomberg

At current prices, extracting oil from the North Sea is theoratically the equivalent of burning dollar notes.. Its oil is expensive to extract.

Back to the gloom and doom painted by Dealbook bearing in mind that Monkey is a trickster

NO BOTTOM IN SIGHT FOR OIL PRICES The collapse in commodity prices pushed oil futures even lower on Monday and analysts predicted that the slide was far from over, Jad Mouawad reports in The New York Times.

Oil prices were at a 12-year low on Tuesday, with West Texas Intermediate near $30 a barrel after a decline of more than 5 percent overnight. Brent crude was just under $31 a barrel by the Asian afternoon, as The Wall Street Journal reports.

The drop in commodities prices is being felt throughout the energy sector and beyond. Saudi Arabia said it was considering selling shares in its state-run oil company. Arch Coal, one of the biggest oil producers in the United States, filed for bankruptcy protection to cut its debt. Russia’s main stock indexes plummeted on Monday as oil prices cast a pall over its energy-dependent economy, Andrew E. Kramer reports in The New York Times.

Oil’s decline in the last year was caused in part by Saudi Arabia’s decision not to reduce production. The change, intended to force out high-cost energy producers, backfired on the kingdom and other producers, which now have to consider how to finance their oil-dependent economies.

The slump in oil prices had gained momentum last week on renewed concerns about China’s economy.

Jason Bordoff, director of the Center on Global Energy Policy at Columbia University, said that everything indicated a continued oil glut. “Iran is about to re-enter the market, demand numbers and economic indicators look relatively weak, U.S. supply is holding up in a low-price environment much better than people though and global inventories are growing.”

Many analysts expect more declines. Goldman Sachs and Morgan Stanley have both said that oil could drop to $20 a barrel.

2 of Temasek’s Fab 5 looking sickly?/ Meng Seng’s financial counterpart

In Energy, Financial competency, Temasek on 13/01/2016 at 5:14 am

In 2013, I recommended investing in Temasek’s Fab 5 for KS types. Last June I pointed out problems at two of them Keppel  and SembCorp Marine because of lower oil prices.

The rot continues as Bloomberg reports

The last time Singapore’s marine services industry was staring at what would eventually turn out to be an 18-year drought in demand for oil rigs, Mr Ronald Reagan was starting his second term as US President.

Jack-up rigs, used to drill for oil in shallow waters, saw orders evaporate between 1985 and 2003. As Macquarie notes, rampant overcapacity means such a prolonged slump could well occur again. That definitely would not be good news for the rig-building industry’s two Singaporean leaders – Keppel Corp and Sembcorp Marine.

After a decade-long boom, there were zero new orders globally for jack-up rigs last year. With oil prices swooning, and rigs’ daily rental rates having crashed to US$92,000 (S$132,000) from US$130,000 in 2014, there’s a risk that 70 per cent of Keppel and SembMarine’s order book might get cancelled, especially if the Petrobras bribery scandal in Brazil deepens, Macquarie analysts Somesh Kumar Agarwal and Justin Chiam wrote this week.

… rig-builders’ shares may have to give back much of the China-induced exuberance of the past decade. That could be quite painful for investors, including Temasek.
… owns a little less than half of SembMarine’s parent, Sembcorp Industries, and 21 per cent of Keppel, Bloomberg data shows. It can’t be feeling very chuffed about the 47 per cent slump in SembMarine over the past year, or Keppel’s 26 per cent slide.  

And there might be more trouble ahead. Since early 2004, the two stocks have returned about 300 per cent, thanks primarily to hefty dividends. Those might now start thinning out. According to analyst estimates compiled by Bloomberg, Keppel’s dividends will shrink by as much as 11 per cent over the next three years, compared with annualised growth of 3 per cent over the past three.

No orders coming in doesn’t augur well for shareholders, who will be far behind debtholders in getting paid, and the latter will have substantial claims. Oil- and gas- linked companies with outstanding Singdollar-denominated bonds have to refinance or repay some $625 million of notes this year, a further $390 million in 2017 and $700 million in 2018, Bloomberg-compiled data shows.

The other big risk comes from the duo’s Brazilian yards. Japanese shipbuilders like Mitsubishi Heavy are cutting their losses and exiting as the Petrobras saga drags on. 

Stock in Ensco, the London-based owner of shallow and deepwater rigs, has been hit after Petrobras said it was scrapping a contract in the US Gulf of Mexico because, it claims, Ensco knew about improper payments between a shipbuilder and a consultant when the drillship was constructed, a charge Ensco denies.

Analysts are being predictably slow in sounding the alert. Their median price estimate predicts a 25 per cent jump over the next year in Keppel shares, and a 15 per cent climb in SembMarine.

So far factual or fair comment. But I think the Indian FT* writing for Bloomberg is talking rubbish when he talks of Temasek selling out. Our rig-builders are market leaders, not has-beens like NOL And the oil sector is a cyclical sector, not a declining sector.

Were that triumph of hope over experience to prove elusive, what might Temasek do? It recently decided to sell shipping company Neptune Orient Lines to CMA CGM at $1.30 a share, after having paid as much as $2.80 in 2004 to acquire a part of its 67 per cent stake.

If the Macquarie analysts are right about Keppel and SembMarine eventually trading below book value, like South Korean yards do, then there may not be much point in Temasek’s hanging on to the rig-builders either.

http://www.bloomberg.com/gadfly/articles/2016-01-07/keppel-and-sembcorp-marine-may-bear-the-brunt-of-vanishing-demand

What strholders of SembCorp Marine should be concerned is that SembCorp privates Marine. About 15 yrs ago Keppel did that to FELS.

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*He’s the analyst equivalent of Goh Meng Seng (three GEs, three different parties, and a declining share of the vote). This FT has in the same period worked for Bloomberg, MediaCorp, Reuters and now Bloomberg again. Oh and the last time this FT was working for Bloomberg, he and Bloomberg had to pay damages to one of the Lees, can’t remember which.

As Goh Meng Seng is an exemplar of the traditional oppo politican, this FT shows that T can stand for “Trash”.

 

HoHoHo, StanChart’s a nightmare BUT don’t panic

In Banks, China, Temasek on 06/01/2016 at 1:09 pm

StanChart yesterday fell a further 1.7%, although it remained off the previous session’s intraday low.

In 2015, it was the second worst performer in the UK’s FT 100 index, falling 47%

From FT

Matthew Sutherland, investment director for Asian equities at Fidelity International said wild rides in regional stocks are likely to be the norm for 2016. “We’d better get used to it,” he said.

It’s important that investors don’t panic on weak days, but continue to take a disciplined and calm approach to investing. This is particularly true with regard to China. Yes, China’s growth is slowing, but the quality of that growth (in other words more consumption and less debt-fuelled investment) is far more important, and the difficulties are more than discounted in cheap valuations.

Accentuating the positive, he adds:

The really good thing is that the Chinese stock markets are very broad, which enables us to find lots of great bottom-up ideas irrespective of the macro environment.

Coming back to StanChart, on 15th Dec it led a London market rally on after JPMorgan Cazenove argued that the bank is at least 50 per cent undervalued versus peers.

Capital concerns have been addressed by StanChart’s $5.2bn rights issue, said JPMorgan, which was joint co-ordinator and underwriter to the cash call.

It forecast that, even if loan defaults return to the levels of the 1997 Asian crisis, StanChart’s capital buffer will remain within management’s target range.

Downside protection comes from StanChart’s new strategy to shrink risk-weighted assets by a third and move away from low-return business, with rising US interest rates providing a tailwind, JPMorgan said.

Yet the shares are trading at half their 2016 tangible net asset value and are on less than 10 times next year’s earnings, falling to just five times earnings in 2018, it forecast.

JPMorgan repeated an 870p target price on StanChart, which gained 6.4 per cent to 512.7p.

(FT)

 

NoNoNo, Chesapeake

In Energy, Temasek on 21/12/2015 at 2:17 pm

Wonder if Temasek got out of Chespeake when the going was good in 2913?

Even in November of  last yr its shares had hit $24 and, amazingly, the company’s credit rating rose to the cusp of investment grade.

But now the company’s shares have fallen below $4. FT reports: A liquidity crisis has forced it to pursue a debt exchange. Bondholders can swap their existing notes for a discounted set of notes that mature further in the future.

The new notes are of a higher priority in the capital structure, which will induce some creditors to take the discount. Morningstar estimates that the transaction will create a $1.7bn cushion that will keep Chesapeake afloat.

HoHoHo, the rubbish in Temasek’s stocking

In Temasek on 21/12/2015 at 10:12 am

The size of Temasek’s portfolio has doubled since it lost $40 billion during the globalfinancial crisis of 2008/2009 due to losses on Western banks such as Bank of America (BAC.N).

But returns lagged Temasek’s own internal metric of making gains above the cost of capital in five out of the last eight financial years, its annual reports show.

A concentration of investments in a few large-cap stocks mostly in Singapore and Chinalimits its ability to outperform.

Ten companies, including Singapore Telecommunications (STEL.SI), Singapore’s biggest lender DBS Group (DBSM.SI) and China Construction Bank (0939.HK), account for half of its assets.

To boost returns, Temasek could sell some underperforming assets, such as Jakarta’s No. 6 lender Bank Danamon (BDMN.JK) and the rail business of Singapore train and taxi operator SMRT (SMRT.SI), a senior Southeast Asian banker said. [Real BS, this banker. Any sale of both would be at fire prices, unlike NOL where its position on on transpacific route made it a stratrgic prize for shipping cos dominant on the European route. ]

Danamon, which is 68 percent owned by Temasek, is trading below its book value and its return on equity is the second-weakest among Indonesia’s top 10 lenders over the last financial year, according Thomson Reuters data.

SMRT is under pressure after suffering a series of operational breakdowns.

Bertrand Jabouley, credit analyst at Standard & Poor’s, said that even though the timing of the NOL disposal seemed suboptimal given the ongoing crisis in the sector, Temasek may want to use the proceeds for more profitable investments.

“They may have much more profitable investment opportunities in their pipeline to put the disposal proceeds to work,” he said.

http://uk.reuters.com/article/uk-temasek-strategy-idUKKBN0U003N20151217

 

HoHoHo, StanChart’s rights issue is juz first-aid

In Banks, Financial competency, Temasek on 18/12/2015 at 12:59 pm

Temasek is willing to give Standard Chartered (STAN.L) time to work on its turnaround before deciding on the fate of its underperforming $4 billion (3 billion pounds) stake in the UK bank as part of a portfolio reshuffle, people familiar with the matter said.

“Temasek is giving them time. They’ve had a lot of engagement with the board, and Bill has sort of managed expectations in terms of turning this ship around,” said one of the people familiar with Temasek’s thinking.

Temasek declined to comment.

It was not clear how long Temasek will wait to see the results of the restructuring.

By subscribing this month to its allotted portion of Standard Chartered’s $5 billion share sale, the Singapore investor has buttressed that position for now. But Temasek may become increasingly uncomfortable with the investment if shares in the bank do not recover.

Its paper loss on the Standard Chartered investment was $1.2 billion, excluding dividends, just on the 12 percent stake it bought in 2006, according to calculations by Reuters. Temasek raised its stake to 18 percent in December 2007. Since then Standard Chartered’s shares have lost about two-thirds of their value.

http://uk.reuters.com/article/uk-temasek-strategy-idUKKBN0U003N20151217

StanChart completed its rights issue late last week. What the local MSM doesn’t tell us

StanChart .. has suffered because of poor peer-market conditions since it priced its shares. But investors, even though they took up almost all of their rights, are also giving a vote of diminished confidence. After StanChart old shares were shorn of the right to buy new shares on Nov. 23, the stock fell to 15 percent below its theoretical settling price. And the 9.8 percent further fall since then is worse than the decline in the Euro Stoxx Banks index.

That’s perhaps not surprising. StanChart, under new boss Bill Winters, is years from earning a return above its cost of equity. Since the new money will mostly go to bolstering the balance sheet rather than promoting productive lending, the return on the new money may be even lower. That might explain why, while Lonmin seemingly faces graver challenges, it’s StanChart to whom the market has blown a bigger raspberry.

 

 

HoHoHo: Scholar screws up?

In Temasek on 08/12/2015 at 11:26 am

Re the purchase of NOL at a hefty premium to undisturbed share price and close to book value by French family

the timing could prove smart. This looks a lot like the trough in the cycle: shipping rates, industry sentiment, and valuations have all crashed. That’s exactly when families like the Saades, which can take a longer-term perspective than public companies, should be pouncing. Though they are a family of shippers rather than truckers, they are still in it for the long haul.

http://blogs.reuters.com/breakingviews/2015/12/08/container-shipping-deal-stacks-up-in-multiple-ways/

Btw, one of those who forgot to sell my two lots of NOL at $5. But still above my cost.

S/o of JBJ ng kum guan he not aristocracy despite dad sending him posh ang moh private school http://sonofadud.com/2015/12/07/nol-another-case-of-value-destruction-by-our-natural-aristocracy/

 

Three cheers for the PAP

In Corporate governance, Economy, GIC, S'pore Inc, Temasek on 07/12/2015 at 6:21 am

(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?

In GIC, Private Equity, Temasek on 04/12/2015 at 4:55 am

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.

 

HoHoFo: StanChart gets E grade in UK test

In Banks, Temasek on 02/12/2015 at 4:41 am

Royal Bank of Scotland and Standard Chartered were the weakest of Britain’s seven largest lenders in a Bank of England stress test.

For the second year, the central bank has subjected the UK’s biggest lenders to tests to measure whether they would survive a financial shock.

This time, it was assumed that oil had fallen to $38 a barrel and that the global economy had slumped.

No bank was ordered to come up with a new capital plan.

Out of the seven banks tested, RBS and Standard Chartered were found not to have enough capital strength, but both took steps to raise capital …

Standard Chartered’s chief executive Bill Winters said: “The results of the test demonstrate our resilience to a marked slowdown across the key markets in which we operate.

“The test was conducted on our balance sheet as at the end of 2014. Since then we have made further significant progress in strengthening our capital position.

“We are operating at capital levels above current minimum regulatory requirements and have a number of additional levers at our disposal to further manage capital.”

http://www.bbc.com/news/business-34972092

HoHoHo, next yr’s test will be harder still.

http://www.bbc.com/news/business-34972092

The UK’s banking sector is heavily (relatively) exposed to China much more so than other countries by a country mile. The exposure is concentrated between HSBC and Standard Chartered. Loan exposure to China represents around 30% of their loan books.

By compaeison our local banks’ exposure is “peanuts”.

Btw, Aberdeen Asset Mgt is a top 10 shareholder in both banks.

NOL: Problem for scholar, ex-general

In Shipping, Temasek on 16/11/2015 at 2:46 pm

In response to recent news that Neptune Orient Lines Ltd. is in acquisition talks withMaersk Group and CMA CGM SA, Moody’s Investors Service has warned A.P. Moeller-Maersk A/S not to pursue any acquisition, Bloomberg reports.

http://shipandbunker.com/news/world/149384-moodys-warn-maersk-on-nol-acquisition

“Maersk Line could possibly derive some synergies from an acquisition, but Maersk Line is one of the few profitable companies in the sector and it could dilute margins initially,” Marie Fischer-Sabatié, a senior vice president at Moody’s, told BloombergBusiness.

“Real consolidation could be positive for the cost structure of companies involved, but it would likely take more than just one or two mergers to materially improve the overall market conditions in the container market.”

It would likely take more than just one or two mergers to materially improve the overall market conditions in the container market

Marie Fischer-Sabatié, senior vice president, Moody’s

Last month, Maersk cut its 2015 forecast underlying profit by 15 percent to $3.4 billion, and as part of a cost-cutting strategy it will also slash up to 4,000 Maersk Line jobs and reduce network capacity.

Although he noted that the group’s base strategy is to grow organically, Nils S. Andersen, chief executive officer for Maersk, said he would “welcome any consolidation – that would only be healthy for the container line industry.”

Fischer-Sabatié believes the group is more likely to pursue acquisitions for its oil unit “because it needs to increase its reserve levels.

“If they find the right acquisition target, it could have a positive impact on Maersk Oil’s business profile.”

Despite Maersk’s challenges, Anderson recently pointed out that the group’s 2015 showing overall “reflects good performance in very challenging oil and container shipping markets.”

StanChart: What ST doesn’t tell S’poreans

In Banks, Corporate governance, Temasek on 06/11/2015 at 4:26 am

And neither did BT or MediaCorp.

The constructive, nation-building media should have reported or analysed or quoted analysts that

— Temasek could have prevented the problems from growing out of control by kicking previous mgt’s ass* when yellow lights were flashing Ang moh tua kee isit? HoHoHo);

— the shake-up restructuring plans are underwhelming investors (shares have fallen over 11% this week; and

— the changes will not be that rewarding.

It’s not me, or TRE cybernuts or Uncle Redbean (they too didn’t), it’s the UK’s Guardian that writes:

The big long-term shareholders – Temasek, from Singapore, and our own Aberdeen Asset Management – are obliged to sound supportive, swallow the lack of a final dividend and back the rights issue. But they should also look in the mirror. The market smelled trouble at Standard Chartered for at least two years, but the pressure from the wings rarely rose above the level of mumbles. Temasek and Aberdeen were too willing to believe the boasts from the highly remunerated boardroom about Standard Chartered’s specialness.

The consequences of delay are now horribly clear: a decade of chasing growth will be followed by half a decade of clean-up and cost-cutting. This story could have been different.

http://www.theguardian.com/business/nils-pratley-on-finance/2015/nov/03/standard-chartered-fails-to-realise-resilience-boasts

Yup it could have been different. Temasek has an over 20% stake in StanChart which should give it a strong voice, if it uses it.

And the MSM doesn’t tell us that some analysts are not impressed by the plans to launch a capital raising, cut 15,000 jobs, slash almost 30% of its $10bn cost base and restructure almost a third of its US$315bn risk-weighted assets.

In fact credit rating has juz been downgraded by Fitch Ratings in the latest sign that the new strategy is not being well received.

And finally the MSM doesn’t tell us that the clean-up will not bring great rewards

Yet these rewards are humdrum and distant. StanChart expects return on equity to remain below 10 percent until 2020. That’s no better than troubled investment banks like Deutsche Bank. A further economic slowdown in its main markets, or increased regulatory demands, could throw it off course. Even after a 10 percent drop on the morning of Nov. 3, StanChart shares trade on about 80 percent of tangible book value, after adjusting for the rights issue. With a long slog ahead, it’s hard to see much upside.

http://blogs.reuters.com/breakingviews/2015/11/03/stanchart-faces-years-of-pain-for-humdrum-gain/

Here’s another interesting insight

Never believe a big bank that boasts that its culture is so different: its lending principles conservative, its business immune to the traditional banking vices of over-confidence, over-expansion and bad behaviour.

For a decade, Standard Chartered told us that its rising income and profits flowed from a unique winning formula. Here was chairman John Peace in the annual report a few years ago describing the supposed magic: “2012 was another year of good performance for Standard Chartered, thanks to a consistent strategy, a stable management team, supportive clients, customers and shareholders, and, above all, our great people.”

(Guardian)

——————————–

*It was already unhappy over corporate governance over the number of executive directors on the biard and had expressed its unhappiness publicly by voting against the  reappointment of the executive directors yrs ago when the bank was a jewel in the Temasek portfolio and management were considered geniuses.

Chinese slowdown? What slowdown?

In China, Temasek on 29/10/2015 at 1:46 pm

Still buying iPhones as if there’s no tomrrow. If only HoHoHo had bot apple instead of Chinese banks. (((((

Apple is becoming a tech company with Chinese characteristics. About 24 percent of the $51.5 billion of sales booked in its latest quarter – and two-thirds of revenue growth over the last year – came from China. Apple’s new iPhone installment plan could bump this up even further. Chief Executive Tim Cook’s bet on the Middle Kingdom is yielding impressive dividends, but carries existential political risks for the $675 billion company.

The iPhone now accounts for 63 percent of Apple sales, and a greater chunk of profit. Investors and observers will have to wait for next quarter to see exactly how well its newest wares are doing. They were only on the market for a slice of the quarter. But Apple’s figures do show its reliance on overseas sales, and in particular China. The company sold $12.5 billion worth of goods in the country, which is nearly double the amount it booked last year. Most of that demand was for its phones.

The number of iPhones it sells in China could grow over the next few years, thanks to a program Apple recently rolled out. Mobile operators in the United States and in some other markets have moved to selling phones through monthly installment plans. Apple has joined them. Customers pay over two years, but can upgrade after one year if they sign a new two-year contract and give their old phone back to Apple. Many of these devices will end up in China.

The country has long been a big market for refurbished phones. Around 40 million iPhones were already on China Mobile’s network before the operator agreed to sell them to users in 2013. Apple can now sell refurbished phones. They are perfect for China, which is a big market for cheaper smartphones.

http://blogs.reuters.com/breakingviews/2015/10/28/apple-a-tech-company-with-chinese-characteristics/

Related article

it’s fanciful to think that the performance of a handful of companies could serve as a reliable guide to the habits of 1.4 billion people. “Bellwether” originally described a sheep which leads the rest of the flock. That’s an image investors should probably avoid.

http://blogs.reuters.com/breakingviews/2015/10/28/searching-for-china-consumer-bellwethers-is-futile/

Maersk issues profit warning, NOL capsises

In Economy, Shipping, Temasek on 27/10/2015 at 4:12 am

Maersk, the Danish shipping and oil firm, said it will probably make $600m (£389m) less profit than previously thought, as global demand dropped. 

The firm’s progress is seen as a good indicator of global trade, as shipping carries about nine tenths of the world’s trade, and Maersk Line is the world’s biggest container carrier.

Maersk will probably book $3.4bn in profit for 2015, it said.

Shipping companies were charging about $233 to move 20-foot containers from Asia to Northern Europe, a loss-making rate according to analysis by Reuters.

Maersk blamed the drop in earnings on slender container shipping margins. It makes about half its profit from running the Maersk Line.

“Maersk Line has been hit harder than expected by low capacity utilisation due to the low volume growth in the global container transportation market,” Sydbank analyst Jacob Pedersen said.

http://www.bbc.com/news/business-34612966

As Maersk Line consistently outperforms NOL (led by scholar, ex-SAF general and ex-Temask MD) does this mean NOL will capsise and sink without a trace when it reports results at the end of October?

HoHoHo: Is EMC a steal?

In Private Equity, Temasek on 14/10/2015 at 5:58 am

Or are EMC shareholders crying all the way to the bank?

Michael Dell, his company, private equity firm Silver Lake, our very ownTemasek and others are paying U$33.15 a share, they say, for the data storage-based tech conglomerate. Most of the money they will be using (US$63 67bn) is borrowed. They are only putting up US$4bn.

That breakup tally is higher than the Dell offer, more so after discounting the headline value for the fall in VMware’s stock price since the headline price was calculated and because a tracking stock, which reflects an indirect interest and raises legal risks, is likely to trade at a discount. But even an offer worth, say, $30 a share would probably compare favorably given the risks involved in splitting up EMC, which would take months with success far from assured.

It’s also hard to see other companies paying up for EMC. Some have already passed. Meanwhile, Dell’s target has also proved unable to engineer succession at the top, with longtime boss Joe Tucci still in situ after postponing his retirement several times.

All this presumably explains why Elliott has gone public in support of the sale to Dell. Even if the ersatz VMware paper isn’t worth as much as Dell says, the cash component alone is about equal to EMC’s undisturbed stock price. Throw in the tracking stock, and much of EMC’s conglomerate discount goes away. In a business that’s on the verge of turning down, investors should take the money and run.

http://blogs.reuters.com/breakingviews/2015/10/12/emc-investors-get-67-bln-ticket-out-of-trouble/

HoHOHO, a player in “Largest Technology Deal Ever”

In Private Equity, Temasek on 13/10/2015 at 5:07 am

Dell to Buy EMC in Largest Technology Deal Ever The acquisition of the storage provider for $67 billion is intended to help Dell adapt to a changing tech landscape.

(NYT Dealbook)

Michael Dell, Silverlake and Temasek, which backed his PC buyout two years ago, will put up about US$4bn in equity to support the deal.

Update at 6.45am:

Deal rationales

At $67 billion, it is the biggest corporate marriage in the information-technology (IT) industry ever. It is also emblematic of a divide running through the IT sector. Dell and EMC are members of an old guard, which is scrambling to regroup in the face of the biggest shift in the industry since smaller, networked machines dethroned mainframe computers in the early 1990s. That shift is the move to cloud-computing services hosted in data centres with big connections to the internet. Of the firms leading the charge, none is stronger than Amazon Web Services (AWS), the cloud-computing arm of the online giant.

Consolidation would give the merged firm more bargaining power, not least when dealing with big cloud providers themselves, and would also gel with another trend in the IT industry: converged infrastructure. Traditionally, servers, storage devices and networking equipment have been sold separately. Now they are being increasingly offered in integrated bundles by one vendor, sparing customers the tedious task of making them work together—a trend that has been pioneered by EMC in a joint venture with Cisco, a big maker of networking gear. The next step, which some big cloud operators that make their own hardware are already taking, is to merge the different components by using basic computers and have software turn it into servers, storage devices or routers as needed. This development would play to Dell’s strengths: it excels at making commodity hardware.

http://www.economist.com/news/business/21673523-clouded-marriage-merger-dell-and-emc-more-proof-it-industry-shifting

HoHoHo: Relying on mgt incompetence at StanChart

In Banks, China, Emerging markets, India, Temasek on 11/10/2015 at 6:22 am

Standard Chartered has to hope that a quarter of its top brass really aren’t very good at their jobs. That is the portion of the UK-listed emerging markets bank’s 4,000 most senior staff who will find themselves surplus to requirements, Reuters reported on Oct. 9. Although StanChart could gain from a big cull, it’s a risky move.

http://blogs.reuters.com/breakingviews/2015/10/09/stanchart-takes-bet-on-management-incompetence/

So should HoHoHo and us S’poreans.

Will ang mohs or Indians get terminated? Not many Chinese to sack despite 50% of revenues related to China business. (Related post: StanChart is Little India)

More for HoHoHo to ponder when she returns to work

StanChart’s shares have underperformed the European peer group by 30 percentage points this year. The bank’s 7.7 percent return on equity in 2014 was unacceptable, especially as it was earned on a relatively low 10.7 percent Basel III capital ratio.

— Some bearish analysts reckon Winters should completely cover the bank’s $8.7 billion of non-performing loans to better match Asian peers like DBS. That would cost $4 billion, more than StanChart’s expected $3.1 billion of forecast 2015 pre-tax profit.

HoHoHo: StanChart’s capital shortfall

In Banks, China, Emerging markets, Temasek on 09/10/2015 at 1:08 pm

FT reported earlier today:

Goldman Sachs analysts predicted on Thursday that StanChart would face an estimated capital shortfall of $4bn in the Bank of England’s stress tests, which measure how the lender would fare in an emerging markets crisis.
But Goldman estimated that StanChart could cover this shortfall by selling its stakes in several Asian lenders and exiting low-returning clients and businesses, such as its smaller retail branch networks.

Related post: Why Little India now includes Marina Bay

But let’s be fair: When emerging mkts and commodities (StanChart has high levels of lending to the crumbling commodities sector) were fashionable 9lucrative) it was the right bank to be invested in. FYI according to Nomura 50% of its revenue is related to China.

Given  the exposure to China by HoHo Ho and GIC, ttme for Ah Loong to call Xi and offer him advice on how to fix the Chinese economy? Can lend him Tharman who is lauded in int’l circles.

Wish HoHoHo had paid heed, not gone on sabbatical

In China, Temasek on 02/10/2015 at 12:37 pm

What with HoHOHO coming back from leave at the end of October, Temasek’s continuing to double down on China and all the carnage that worries about China are causing in global financial and commodity markets, I tot this NYT Dealbook piece from sometime back is timely.

A PRESCIENT WARNING ON CHINA Kenneth Rogoff, a professor of economics at Harvard University, accurately predicted the eurozone debt crisis and has long warned of a potential financial crisis in China. It’s starting to look like he’s right again, Andrew Ross Sorkin writes in the DealBook column.

Mr. Rogoff has made a career of studying financial crises and co-wrote “This Time Is Different,” a seminal book that examined eight centuries of financial crises. He and his co-author, Carmen M. Reinhart, contended that every financial crisis stems from the same problem: too much debt.

“China is the classic ‘This time is different’ story,” Mr. Rogoff said, rattling off all the different rationalizations for why the country convinced itself – and many others – that it could load up on debt but was somehow immune to the laws of economic gravity.

Mr. Rogoff is not the first to identify China as a risk. Henry M. Paulson Jr., the former Treasury secretary and a Sinophile, and the hedge fund manager James Chanos have also been sounding the alarm on China.

The country’s debt load rose from $7 trillion in 2007 to $28 trillion by mid-2014, according to a report by the consulting firm McKinsey & Company, China. “At 282 percent of G.D.P., China’s debt as a share of G.D.P., while manageable, is larger than that of the United States or Germany,” the firm said in a report. “Several factors are worrisome: Half of loans are linked directly or indirectly to China’s real estate market, unregulated shadow banking accounts for nearly half of new lending, and the debt of many local governments is likely unsustainable.”

The question now is how interconnected China is with the rest of the world economy. And in spite of the tumultuous state of the market, Mr. Rogoff says he believes that the recent weeks have raised the prospects of a meaningful crisis. But with China’s trillions of dollars in reserves, he thinks the country may have sufficient tools to prevent a calamity that spreads across the globe – at least for now.

“If you had to bet,” Mr. Rogoff said, “you’d still bet they’d pull it out.”

As a S’porean, I hope his last remark turns out to be correct.

StanChart: Did you know?/ Glencore: Sinking fast

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

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

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

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

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

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

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)?

Temasek, DBS buying into Chinese PosBank?

In Banks, China, Temasek on 29/09/2015 at 4:32 am

China’s Postal Savings Bank Said to Be Near $6.5 Billion Sale. Postal Savings Bank of China, which has the most outlets of any lender in the nation, is nearing an agreement to raise more than $6.5 billion from investors including UBS Group and Temasek Holdings ahead of a planned initial public offering, Bloomberg News reports, citing people familiar with the matter.

(NYT Dealbook last Thursday)

The story also says that DBS will buy a stake.

HohoHo still bullish on China it seems and doubling her bets down. The problem for us is that these stakes cannot be divested completely without upsetting the Chinese. The ang moh banks were able to divest their cornerstone stakes in Chinese banks. They like Temasek got their stakes at “special” prices, but unlike them Temasek is stuck with these stakes, only able to add or decrease at the margins.

Meanwhile rights issues are expected necause of expected bad loans.

HoHoHO: StanChart upsets US again

In Banks, Temasek on 22/09/2015 at 1:40 pm

Documents seen by the FT suggest that the bank continued to seek new business from Iranian and Iran-connected companies after it had committed to stop working with such clients in 2007.

The US authorities are looking into the matter.

Rogue bank strikes again? Think got Temasek as major shareholder can be as yaya papaya as Amos Yee?

HoHoHo: Temasek & GIC China plays

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

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

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.

HoHoHo: Two brokers’ views on StanChart

In China, Emerging markets, Temasek on 10/09/2015 at 12:48 pm

From today’s FT (apologies for lifting)

With StanChart shares down 40 per cent in a year, investors are pricing in a replay of the Asian financial crisis, said Sanford Bernstein. That looks too pessimistic, the broker said, arguing that, whereas the 1997 crisis arrived suddenly, StanChart has had three years’ warning to shrink its current loan book and protect capital.

A FTSE 100 rebound helped lift Standard Chartered away from its six-year low on Wednesday.

With StanChart shares down 40 per cent in a year, investors are pricing in a replay of the Asian financial crisis, said Sanford Bernstein. That looks too pessimistic, the broker said, arguing that, whereas the 1997 crisis arrived suddenly, StanChart has had three years’ warning to shrink its current loan book and protect capital.

“The faster you drive into a crisis, the more you will get hit,” Bernstein said. “The speed at which the bank is hitting turbulence is dramatically different between the last crisis and this one.”

Bernstein added that, while StanChart does not need to raise cash, new chief executive Bill Winters may want to top up capital buffers by $3bn-$4bn “to give it significant leverage when the cycle turns next year”.

StanChart rose 3.2 per cent to 744p as the wider market extended its rally into a third day.

Monday’s FT (Again apologies for lifting. Promise no more after this)

shares hit a six-year low on Monday as worries grew over the depth of restructuring required under new chief executive Bill Winters.

The Asia-focused lender slid 1.7 per cent to 701.4p on reports it may cut a quarter of senior banking roles as part of a new business plan expected within the next few months.

Funding a deep restructuring would put further pressure on StanChart’s cash flow and capital ratios, which already include $49bn of commodities exposure and a further $43bn of risky Chinese and Indian debt, said analysts.

StanChart might need to raise as much as $5bn to cover bad loans, in addition to between $3bn and $4bn to boost its capital buffer to peer levels, forecast Morgan Stanley.

While the broker did not assume StanChart will need to launch a cash call, it put a one-in-five chance on China causing an Asian slowdown economic equivalent to the 1997 crisis, under which it said the shares would be worth 410p.

 

 

Lui not the only ex SAF underperformer

In Shipping, Temasek on 10/09/2015 at 4:39 am

“It’s almost like obituaries and eulogies without the flowers,” Transport Minister Lui Tuck Yew’s response to the flood of e-mail he has received since he said he was leaving politics.

He’s not the only ex-SAFer that consistently outperforms:

In July

Maersk Shares Jump on Strong Results and Share Buy-BackShares in Denmark’s A.P. Moller-Maersk jumped as much as 8.6 percent on Thursday after the shipping and oil group reported second-quarter profits ahead of forecasts and started a $1 billion share buy-back program.

But NOL made only a tiny net profit in April-June after six straight quarters of losses.

NOL Group today reported a 2Q 2015 net profit of US$890 million. Excluding the US$887 million gain on the sale of its supply chain management business, NOL achieved a net profit of US$3 million in the second quarter of 2015, compared to a net loss of US$54 million in 2Q 2014.

(Update at 10am) Can we really be a meritocracy if Lui lasted so long in his post as minister of tpt and the CEO of NOL continues to run NOL?

HoHoHo: Heads or tails, StanChart can’t win/ China banks

In Temasek on 01/09/2015 at 1:26 pm

Standard Chartered’s Puzzling Currency Questions The more dollar loans it has made in emerging markets, the more bad debts it will face as the renminbi, ringgit or rupiah fall. However, if it has lent widely in local currency instead, credit quality may remain stronger, but good loans will still produce weaker revenues in dollars, the bank’s reporting currency.

(NYT Dealbook)

The three major Chinese banks that Temasek invested in ICBC, BoC and CCB  reported only marginal gains in net profit for the first half of the year, while official measures of non-performing loans surged.

Bad debts are already eating into profitability. Increased provisions are the main reason why China’s big four banks reported little or no growth in pre-tax profit in the first half. Industrial and Commercial Bank of China, China Construction Bank, Bank of China now classify more than 1.4 percent of their loans as non-performing. Eighteen months ago, the ratio was around 1 percent.

http://blogs.reuters.com/breakingviews/2015/08/31/slowing-growth-exposes-chinese-banks-debt-debris/

 

HoHoHo: StanChart has another problem

In Banks, China, Emerging markets, Temasek on 27/08/2015 at 1:42 pm

StanChart is expected to call for a rights issue by yr end. But mkt turmoil will make this difficult and expensive.

FT reports

“StanChart has been one of the hardest hit by the market turmoil. Shares in the bank, which is listed in London but specialises in Asia, the Middle East and Africa, have fallen a quarter this month and are down two-thirds in the past two years.

‘One investment banker said worries about slowing Asian growth and falling commodity prices risked creating “a perfect storm” for StanChart that would make it “much tougher to sell new shares” to investors.”

Note that FT reports that according to Nomura, half of StanChart’s Asian revenue in the first half of 2015 and less than 10% of HSBC’s came from China proper.

And that “from trading at more than double its tangible book value, its market value is now a third less than its assets, a discount even to big victims of the financial crisis, such as Royal Bank of Scotland.”

HoHoHo

HoHoHo StanChart goes on a wild sled ride

In Banks, China, Currencies, Temasek on 18/08/2015 at 1:31 pm

FT reports that according to Nomura, half of StanChart’s Asian revenue in the first half of 2015 and less than 10 per cent of HSBC’s came from China proper.

Both “could be in for a rough ride if the swing in China’s currency is the start of a prolonged devaluation

The most obvious effect of a weaker currency is valuation losses on banks’ loans and trading assets in China, which many have used as a bridgehead in the world’s second-largest economy. A lower currency could also spell trouble for customers in China who have borrowed US dollars or euros but are earning renminbi — the “classic FX mismatch,” in the words of Keith Pogson, senior partner of EY’s Asia-Pacific financial services team.”

Western banks also face risks from domestic Chinese counterparts which have borrowed dollars to lend to their own clients. “Asian banks are extremely used to borrowing cheap dollars through interbank markets and then relending it,” said one London-based banker. “In the next couple of years there could be bigger problems if China’s going to carry on devaluing.”

HoHoHo, it was a good idea until June

In China, Temasek on 27/07/2015 at 1:52 pm

In mid June I wrote this https://atans1.wordpress.com/2015/06/15/ho-got-this-one-right/

Temasek was part of a consortium that funded the delisting of Focus Media from the stock market in the US, and relist in China.

Focus Media Holding’s plan to float shares inside China suffered a setback in late June,

Zhu Dehong, the chairman of Jiangsu Hongda New Material, the shell company Focus Media plans to use for its backdoor listing in Shenzhen, resigned for “personal reasons,” the rubber maker said in a filing to the Shenzhen Stock Exchange Tuesday.

Mr. Zhu’s resignation comes a week after Hongda said regulators wereinvestigating the company and Mr. Zhu for allegedly violating Chinese securities laws. Hongda gave no details on whether these investigations were linked Focus Media’s plan to return to its home turf through what is known as a reverse merger. WSJ

Then the collapse of the Chinese stock markets led the authorities to, among other things, suspend new issues of shares.

HoHoHo. There’s many a sliptwixt the cup and the lip.

HoHoHo, StanChart got wrong CEO?

In Banks, Emerging markets, Temasek on 24/07/2015 at 1:04 pm

But first, shumething from the respected Terry Xu of TOC http://www.theonlinecitizen.com/2015/07/leaked-cables-on-the-failed-leadership-transition-of-temasek-holdings/

Standard Chartered Shakes Up Management Structure The British bank will be organized around three business lines, and top managers will report directly to the new chief executive, William T. Winters.

Did the recruiters at Standard Chartered and Credit Suisse get their dossiers mixed up?

Bill Winters is beginning his tenure as the new boss of the London-based emerging market lender at around the same time that Tidjane Thiam takes charge of the Swiss bank. Both are capable financial executives, but their experiences seem uncannily to better suit the other’s job. That they’ve wound up where they did, rather than where their resumes would suggest they should have, may say more about where the institutions they lead are headed.

Winters, who on July 19 reshaped StanChart’s management structure so that the heads of its major business units now report to him directly rather than to deputy Mike Rees, made his career leading JPMorgan’s investment bank in London … This would appear to eminently qualify him to run Credit Suisse. Its investment bank – stronger in the United States than elsewhere – competes directly with JPMorgan. And its private bank needs to more aggressively poach the very rich folks that Renshaw Bay, the firm he founded, calls customers.

Instead, $48 billion Credit Suisse got an insurance executive, French-educated Ivorian Thiam. True, he showed an affinity for deals as chief executive of Prudential, the UK insurer: an aborted attempt to snatch American International Group’s Asian operations was particularly bold. Private banking arguably should be run more like insurance than investment banking or trading.

Similar thinking prevailed when Barclays named a retail banker to the helm three years ago. But the British lender let Antony Jenkins go on July 8 partly because it needs someone capable of making an investment bank hum.

Though Credit Suisse may not be pre-eminent in Asia, Thiam’s experience there could help rectify that. Of course, that’s the region where $39 billion StanChart is strongest. And Africa, where Thiam was born, is one of StanChart’s prime growth areas. By contrast, Winters’ orientation has been to developed markets – places his bank shows zero interest in pursuing.

http://blogs.reuters.com/breakingviews/2015/07/20/shouldnt-credit-suisse-and-stanchart-swap-ceos/

Ho got this one right

In China, Temasek on 15/06/2015 at 1:14 pm

It was reported earlet that one of the funders of the US delisting was Temasek.

CARLYLE-BACKED COMPANY REACHES $7.4 BILLION DEAL FOR CHINA LISTING Focus Media, a Shanghai advertising company that was delisted from the Nasdaq two years ago after being targeted by the short seller Muddy Waters, on Wednesday reached a $7.4 billion deal to list on the Shenzhen stock exchange, Neil Gough writes in DealBook. Focus is returning to the market through a so-called backdoor listing, in which its main assets are sold to a company already listed in Shenzhen in exchange for shares that represent a controlling stake in the listed company. On Wednesday, Jiangsu Hongda New Material, a Shenzhen-listed manufacturer of silicone rubber products, said it would pay 45.7 billion renminbi, or $7.4 billion, mostly by issuing new stock, to acquire control of Focus.

In 2011, Focus Media was still listed on the Nasdaq when Muddy Waters accused it of overstating the number of screens in its LCD advertising network by about 50 percent, allegations that Focus Media denied. In 2013, the company was acquired and taken private by its chairman and a group of Chinese and foreign private firms that included the Carlyle Group, at a valuation of $3.7 billion.

NYT Dealbook

US marshalls target Harry’s and Ho’s banks

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

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

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

Chart: Bank fines with US regulators

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

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/

Relooking at 2 of Temasek’s Fab 5/ Whither oil prices

In Energy, Temasek, Uncategorized on 05/06/2015 at 6:51 am

I’ve advised since 2013 that investing in Temasek’s Fab 5 is a no-brainer for conservative, KS types. https://atans1.wordpress.com/2013/10/03/temaseks-fab-5-spore-blue-chips/

Here’s looking  at major problems at two of them.

Problems in the Brazilian and Mexican oil industries caused by the fall in oil prices are not good for Keppel and SembCorp Marine. They have received massive orders for rigs from Latin America in recent years.

But new orders will be weak and existing contracts will renegotiated.

Both have also been forced to deny allegations of corruption in winning Brazilian biz. There is a big  political and financial corruption scandal in Brazil, centred around Petrobas, its national oil champion. Petrobas has been a big player in the rig market.

But recorded order books are huge (billions of USD) and both have weathered storms. Both have experienced, internally promoted CEOs

Time to cut and run is when scholar, ex-SAF general is parachuted in as  CEO (like in SMRT, NOL).

On oil prices: views are very mixed

Big Oil is too confident about crude prices. After a 40 percent rally from January’s six-year low, the momentum has been on the upside. But the current prices – $65 a barrel for Brent and $60 for WTI – look more like a ceiling than a floor.

That is not what many insiders seem to think. Some oil service companies expect mid-$70s Brent by the end of this year. Anglo-Dutch Shell assumed oil will rebound to $90 by 2018 in its $70 billion takeover of the UK’s BG Group. Some believe that the steep cut in capex costs will affect supply, including shale, and boost prices again.

http://blogs.reuters.com/breakingviews/2015/06/01/why-the-oil-price-will-fall-again/

Just this week, the head of BP said he doesn’t expect the glut to clear until at least 2016. The Shell view would be a good excuse to hold onto these two Fab5 shares.

StanChart has Middle Eastern personnel problems

In Banks, Emerging markets, Temasek on 04/06/2015 at 12:04 pm

Standard Chartered Said to See Exodus in Mideast Operations The high-profile departures at Standard Chartered include the global head of Islamic banking, the chief executive for the United Arab Emirates and the chief executive for Bahrain, Bloomberg News reports, citing people with knowledge of the matter.

(From over a week ago)

Ho, Ho, Ho, StanChart should do this too

In Banks, Emerging markets, Temasek on 03/06/2015 at 2:10 pm

Up to 20,000 people (8% of current work force) could be sacked at HSBC as the chief executive attempts to pacify investors by reducing costs to improve profits (see below): Us shareholders getting shirty.

Temasek, Aberdeen and other major shareholders should tell StanChart to cut its headcount. Although an ang moh bank, many of its senior and middle managers are “countrymen”, especially here in S’pore (Brits and Hongkies don’t love FTs that much). Ask presedential candidate Tan Jee Say and PAP FT MP Ms Foo: They had Indian FTs ahead, behind and beside them. Rumour has it that Indian FTs sacked both for non-performance, replacing them with less experienced and qualified “countrymen”.

The chief executive of HSBC, Stuart Gulliver, is expected to signal next week that thousands of jobs are to be cut when he outlines his latest strategy for the global banking business, according to reports.

After he took the helm in 2011, Gulliver outlined the need for 25,000 job cuts from a global workforce that then stood at 296,000. The annual report for 2014 puts the current number of employees at 266,000, or 257,600 full-time equivalents.

Another 10,000-20,000 cuts are reported to be on the cards as Gulliver attempts to pacify investors by reducing costs in an effort to bolster profitability. He is also expected to use the strategy day on 9 June to provide an update on plans to further retrench internationally, including from Brazil and Turkey.

http://www.theguardian.com/business/2015/jun/01/hsbc-boss-stuart-gulliver-expected-announce-thousands-job-cuts

StanChart: Ho, Ho, Ho on a wing and a prayer

In Banks, Emerging markets, Temasek on 20/05/2015 at 1:21 pm

Last yr when Temasek gave a media presentation on its results, the question on StanChart elicited a BS reply but which when viewed today tells a lot about Temasek’s strategy in dealing with dogs with fleas: “Everything will be alright in the long term”. Err remember Keynes said in the long run, we are all dead.

QUESTION: Could you give us some comments on how do you see StanChart performing in your portfolio because over the last few years, especially in the last year and a half and looking at the outlook as well, they seem to be finding it quite challenging and there was a profit warning as well. What is your plan for StanChart? Do you think that… is that something that you would like to exit in the long term or you would treat StanChart as another Olam where you could actually try to take over?

RS: So look, it’s obviously not fair for us to comment on individual companies but all I would say is that yes, a lot of our stocks go through volatility. Standard Chartered is an emerging markets bank and like all emerging markets banks, the stock over the last year has been quite volatile. We, however, see ourselves as long term investors, short term volatility doesn’t concern us. We look at our investments over a longer term and use our value test to decide whether what we do with those stocks and we remain as an active investor always engaged with the companies.

S’poreans hanna do NS for China: Ho Ho Ho

In Banks, China, Temasek on 18/05/2015 at 2:05 pm

We (or rather Temask but then even Ho Ching has said Temasek’s money is our money, something Roy and his fellow cybernuts pretend she never said) have a big bet on Chinese banks.

And recently I reported some bad news: https://atans1.wordpress.com/2015/05/03/temaseks-china-banks-strong-headwinds-2/

More bad news:

Chinese policymakers have ordered banks to keep lending to local government projects under construction, in a sign of concern that a crackdown on shadow financing has reduced municipalities’ spending and is hurting the economy.

Financial institutions which signed legally binding contracts before the end of 2014 to loan to money to construction projects backed by local government financing vehicles (LGFVs) must not stop lending or reduce the loan size, a document posted on the State Council website Friday said.

“It is necessary to support the financing needs of LGFV projects under construction and ensure an orderly continuation,” the regulators said in the document.

“This will help meet reasonable funding demand of the real economy, as well as effectively prevent and resolve fiscal and financial risk.”

http://www.reuters.com/article/2015/05/15/us-china-debt-lgfv-idUSKBN0O00JM20150515

NOL versus Maersk: What can I say?

In Shipping, Temasek on 15/05/2015 at 7:12 am

Maersk Line the world’s largest container shipping business reported a jump in net profit to $714 million from $454 million, due largely to lower bunker fuel prices

http://www.reuters.com/article/2015/05/13/maersk-results-idUSL5N0Y41JZ20150513

Singapore-based container shipping firm Neptune Orient Lines Ltd said on Thursday its first-quarter net loss narrowed to USD$11 million (S$14.5 million) from $89 million a year earlier, aided by cost savings and lower fuel cost.

NOL reported revenue for the three months ended March 31 at $2 billion, down 13 per cent on the year, though it posted $30 million in core earnings before interest, taxes and non-recurring items, compared with a $65 million loss a year earlier.

– See more at: http://business.asiaone.com/news/singapores-nol-q1-net-loss-narrows-cost-savings-lower-fuel-cost#sthash.HFQwt8Y4.dpuf

The performance of NOL’s CEO (scholar, SAF general, Temasek MD) tells the truth about “intelligence” PAP style: it doesn’t work in the real world, only in S’pore.

Temasek: If only chose Apple, not StanChart

In Banks, China, Temasek on 04/05/2015 at 1:48 pm

The big concentration on financials is to play the rising Asian middle class theme. A lot of the exposure goes into China banks (not looking good going forward) and StanChart.

Err should have juz bot Apple leh? Look at its price since 2005 when Jobs returned https://sg.finance.yahoo.com/q/bc?s=AAPL&t=my&l=on&z=l&q=l&c= Ho Ching became CEO of Temasek in 2004, and Temasek started buying StanChart in 2006. She should have bot Apple.

Here’s why based on her thinking of riding the expansion of the Asian middle class (Not Italic bits below are my tots, snide comments).

What do two big American and European multinational corporations have in common? Not much on the surface when comparing consumer giant Apple to the FTSE-listed Standard Chartered bank.

However, both have been significantly affected by emerging markets in their first-quarter earnings. And how they’ve been affected is revealing of the way emerging economies have matured, particularly in Asia.

The emerging markets-focused bank, Standard Chartered, reported a big fall in pre-tax profits of more than one-fifth in the first quarter (22% to $1.47bn) as revenues fell by 4% and costs rose by 1%.

By contrast, Apple had a strong quarter where revenues rose by 27% to $58bn, driven by a 40% increase in sales of iPhones. More than 61 million were sold globally, and notably, the biggest market was China for the first time and no longer the US. [Demand from China’s middle classes, iPhone sales leapt 40% to 61.2m units.]

But iPad sales fell sharply by 29%, reflecting a weak spot in their figures. [Apple fixing this introducing new model for Jap aging market. If works in Jap, another big global winner.]

So, it’s a really tale of two emerging markets. [Ho, Ho, Ho]

One side of emerging economies is a concern over their slowdown in growth, which raises risks over loan repayments, not just in Asia but also commodity exporters in Africa and the Middle East.

These are Standard Chartered’s key markets. Indeed, Standard Chartered took a $476m charge on bad loans, which is 80% higher than the first quarter of last year, although loan impairments were lower than in the previous six months.

[Ho, Ho, Ho]

However, there’s also the consumer side of emerging markets to consider.

For Apple, China’s rapidly growing middle class generated an impressive 72% increase in sales of iPhones. And Greater China has even overtaken Europe to become Apple’s second largest market for the first time with revenues rising by 71% in that region to $16.8bn, which accounts for much of Apple’s strong performance. Net profit was a third higher at $13.6bn for the quarter.

So, as emerging markets, particularly in Asia, become middle income countries, companies that sell to those emerging consumers are well-positioned to benefit.

But the period of rapid economic growth, particularly via debt-heavy investment, of key emerging markets is seemingly over. And companies, particularly banks, are liable to struggle as those economies restructure toward being increasingly driven by consumption.

[Ho Ho Ho: so waz Temasek doing to get into the consumption plays? Olam? Asians eating more peanuts?]

http://www.bbc.com/news/business-32495200

My serious point that by focusing so much on financial services (30% of portfolio and not on consumer plays (outside of the Telecoms, Media & Technology sector: 24%), Temasek has for the last few years been betting on a three-legged horse. Other consumer plays are only a subset of Life Sciences, Consumer & Real Estate: 14%)

Temasek’s China banks: Strong headwinds

In Banks, China, Temasek on 03/05/2015 at 4:36 am

Temasek has stakes in three of the five major Chinese banks. See details here http://temasekreview.com.sg/en/major-investments/financial-services.html

An FT working for Reuters recently wrote

The biggest five banks reported a miserable sub-2 percent increase in earnings for the quarter, year on year. Two rate cuts have pressured their lending rates, and fees from other lines of business have slowed. A bigger drag is borrowers who can’t or won’t pay up. While bad debt levels are still low, charges for credit that hasn’t yet gone bad but might are leaping. These items increased by 73 percent year on year at China Minsheng Bank, and more than 50 percent at Agricultural Bank and Industrial Bank of China.

The valuations of big banks like ICBC, China Construction Bank and Bank of China are also burdened by the lenders’ role in big government schemes that are still not properly sketched out. Take the plan to reform local government finances by swapping some of the estimated 16 trillion yuan ($2.6 trillion) borrowed by regional authorities into new bonds. The new securities could leave banks holding the same credit risk in a different form, at deceptively low rates of interest.

China’s ambitions for global greatness also raises questions. Plans to roll out infrastructure under the clunkily named “one belt, one road” strategy are likely to involve hefty lending commitments. That may bring glory, but also pressure on banks to lend to projects that may take years to generate cash flows. In the meantime, if growth slows more at home, further rate cuts will add pressure to lenders’ margins.

http://blogs.reuters.com/breakingviews/2015/04/30/banks-are-designated-drivers-at-china-market-party/

Below is a Q&A from reported on Temasek’s website. It was asked, last yr,  at a media conference on Temasek’s 2014 Review

QUESTION: Can you confirm if the Chinese banks are the major drag on your relative underperformance last year and then what are your views and plans for them? Thanks.

WYB: The banking stock has been volatile. I would not say the Chinese banks are the major drag on our performance. They do fluctuate from time to time. Chinese economy – we remain very optimistic over the long term. The financial institutions we believe have ample capability to weather the current storm and be able to adjust to the risks they’re facing. So, we remain comfortable with our stakes and we will continue to invest in the financial institutions because they are good proxy for the long term growth for Chinese economy.

RS: If I could just add to that, as you would have seen in our presentation, we had mentioned that about half our portfolio consists of listed stocks in Singapore and stocks that are listed on the H-share in Hong Kong and you saw even the Straits Times Index over the last year had negative returns, so it was not any one set of stocks, it’s just that some of the areas that we had invested in had weak market performance. And again, you know, these are results as of a particular date, March 31st. You mentioned the Chinese banks. Since March 31st, they rebounded by 10 to 12% or even if you look at the Straits Times Index, that’s up about 4%. So, you know, we really look at long term returns and look at investments over the long term horizon and are fairly comfortable with short term market volatility.

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

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

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

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

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

(NYT’s Dealbook)

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

 

 

 

Temasek bidding for China’s POSB?

In Banks, China, Temasek on 27/04/2015 at 11:33 am

Bidders Seen for Stake in Postal Savings Bank of China UBS, BNP Paribas and Temasek of Singapore are said to be among the preliminary bidders seeking to buy 10 percent of Postal Savings Bank of China ahead of an expected initial public offering next year that could raise $25 billion.

NYT Dealbook

Ho Ching has a problem; so have our local banks

In Banks, China, Temasek on 09/04/2015 at 6:54 am

As readers will know Ho Ching has big markers on StanChart and Chinese banks.

Once regarded as a proxy for the growth of Asian markets in commodity-rich nations like Indonesia, StanChart has today become a victim of the reversal of fortune suffered by many emerging markets and their heavily indebted corporate borrowers …

Much of the lending to Asia outside of China assumed the region would grow on the back of insatiable demand from China. Much of the lending to China itself was based on that same expectation. That faulty thinking was then compounded by assuming that the value of the Chinese property used to back the loans would also continue to rise. But local banks in China, such as Agricultural Bank of China, are beginning to report that their bad loans have doubled — although officially they remain under 3 per cent. (Excerpt from recent FT article)

Ho Ho HO.

But it’s our problem too now that Tharman is now using projected long term returns from Temasek to spend our money on ourselves. Cybernuts might want to note that their heloo, Ong Teng Cheong, wanted to lock-up all the returns from the reserves (more LKY and Dr Goh). It was Ah Loong that fought him. Ah loong is the real people’s hero. if Ong had his way, we’d be pressing our noses on the iron bars guarding our reserves: Money, money everywhere/ Not a cent to spend/ Give thanks to Ong Teng Cheong

But the pix’s not that great for our local banks either: what with DBS’s exposure to Greater China and Indonesia, OCBC’s exposure to Greater China, and UOB’s and OCBC’s exposure to M’sia. Btw, OCBC has FTs as its Chairman and CEO, while DBS and UOB have true blue S’porans (Yes, I’m counting Gupta as a local. He’s a real talent.)

And if property prices tank here …

Serious instability at StanChart?

In Banks, Temasek, Uncategorized on 06/04/2015 at 1:42 pm

Following the coming change in CEOs, the resignation of a very senior manager and a planned change of chairman, Viswanathan Shankar (new citizen and a real talent like DBS’s Gupta), head of the bank’s Europe, Middle East, Africa and Americas business, is said to be planning to start a private equity fund. The bank it seems wanted to give him additional responsibilities. This not not good as the deputy CEO (passed over for the job) is also expected to leave.

Temasek and other major shareholders wanted change. May be they’ll end up with serious instability.

World class banks, “peanuts” salaries

In China, Corporate governance, Temasek on 03/04/2015 at 5:00 am

China banks’ CEOs are monkeys? Temasek has significant stakes in three of them.

 

 

Exhibits from FT

 

Lex chinese banks

StanChart: Broker Upgrade to “Overwight”

In Banks, Temasek on 24/03/2015 at 1:45 pm

Yesterday, StanChart was the top performer in the FTSE 100, adding 7% thanks to JP Morgan upgrading its rating on the bank’s shares to “overweight” from “neutral”.in a note to clients.

Reits: Keep on holding

In Economy, Financial competency, Property, Reits, Temasek on 19/03/2015 at 7:24 am

Likewise stocks with sustainable, decent dividend yields like Temasek’s Fab 5

“The Fed rate projections have been significantly lowered over a three-year horizon. This points to a later lift-off,” FT quotes a BNP Paribas economist.

In simpler English:

“The Fed is in no rush,” said Ward McCarthy, chief US economist at Jefferies.

“At the current juncture, the timing of the liftoff is still indeterminate and will depend upon the inflation data. The policy statement eliminated the use of ‘patient’ in forward guidance, but the FOMC also described the new forward guidance as being “consistent” with the prior forward guidance.”

He added: “The word ‘patient’ was removed, but the meaning of patient remained.” (BBC)

Or as Reuters puts it:  The Federal Reserve on Wednesday moved a step closer to hiking rates for the first time since 2006, but downgraded its economic growth and inflation projections, signaling it is in no rush to push borrowing costs to more normal levels.

http://www.reuters.com/article/2015/03/18/us-usa-fed-idUSKBN0ME0D520150318

StandChart’s 3 new advisers to Financial Crime Panel

In Banks, Temasek, Uncategorized on 18/03/2015 at 11:13 am

The British bank added the former leaders of Interpol (a S’porean) and the Swift bank messaging network and a former counterterrorism adviser to President George W. Bush.

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

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

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

StanChart: Gay Portuguese in running to be CEO

In Banks, Corporate governance, Temasek on 03/02/2015 at 1:34 pm

The CEOs of Llyods and HSBC UK are reported to be hot favourites according to Bloomberg http://www.bloomberg.com/news/articles/2015-01-28/lloyds-hsbc-executives-seen-as-favored-for-stanchart-ceo-role. Both are Portuguese. And the latter is gayhttp://www.theguardian.com/business/2015/jan/18/hsbcs-antonio-simoes-says-being-gay-was-key-to-career-success .

Wespac’s CEO is also in the frame.

Another report says that our very own Gupta (FT turned new citizen) is also a possible candidate.

Given that StanChart is big in M’sia, Hk, India and Indonesia, and wants to be big in China, I somehow don’t think appointing a gay is on the cards

FT’s Lombard thinks that “ex-StanChart guy Alex Thursby” will get the nod.

Alex Thursby, who went on to run ANZ’s Asian businesses and is now the CEO of National Bank of Abu Dhabi. In his current role, he is trying to drive a bank that will become multinational by following trade within the emerging world – what he calls the West-East corridor. But when asked if this looks a lot like a StanChart model, he says: “I think this has similarities with the Standard Chartered of old. The Stanchart model has changed over the years since I was there, and whether it’s changed for better or worse is for others to make a judgment on.”

Thursby’s words are carefully chosen but he’s clearly referring to StanChart’s ventures into financial markets businesses that it used to leave to the pure-play investment banks. And it is notable that the financial markets business is the one that is causing the problems in the bank today; the warning today says that division is the “main challenge” facing the bank and that everything else is in line with expectations. The head of that business, Lenny Feder, is to take a 12 month sabbatical for personal reasons, the bank says, and will not return to that role afterwards.

The financial markets business in StanChart parlance includes some things that others might consider mainstream, like foreign exchange, but it also houses equities and commodities, among other things. Peter Sands, speaking about the reduced performance, said today that the business was being hit by falling volumes in rates, squeezed margins, regulatory changes, and the fact that less business is done in a low-rate environment.

None of which would have had much impact on the Standard Chartered model of old. Which raises a further question: perhaps this most storied and reliable of institutions should get back to doing what it’s good at. It might be boring. But it works.

http://www.forbes.com/sites/chriswright/2014/06/26/is-the-standard-chartered-model-broken/

It jus shuttered its cash equity biz, if you must know.

Change a’coming at StanChart

In Corporate governance, Hong Kong, Temasek, Uncategorized on 26/01/2015 at 3:07 pm

The Sunday Telegraph reported that Temasek and Aberdeen (between them they hold 30% of StanChart) had told chairman Sir John Peace that he must find a replacement for Mr Sands within months or stand down himself.

FT reports the bank is looking to replace Peter Sands this year and has hired a headhunter to look for a successor ASAP. It says that Temasek and Aberdeen hold him responsible for not responding fast enough to a reversal of StanChart’s fortunes.

Why we have so few world class GLCs

In Corporate governance, S'pore Inc, Temasek on 03/01/2015 at 5:39 am

We only have three, Keppel, SembCorp and SIA.

Here’s a possible reason from the letters page of the PAP’s bible, the Economist:

State-owned failings

* SIR – No long analysis is needed to understand why state-owned firms underperform (“State capitalism in the dock”, November 22nd). Two main mechanisms exist for accountability in modern society: market pressure and political control. State-owned firms fall between the two. They lack the degree of competition that private firms typically face but also do not have the direct political control that applies in conventional government.

Lack of accountability means lack of performance. Effectiveness is best secured by either keeping ventures with classic government agencies, instead of with state-owned firms, or by placing ventures in fully privatised companies with full market exposure, whichever best suits the activities in question. A bit of each is not enough, but instead creates a grey zone with grey results, which is what we see for state-owned firms.

Bent Flyvbjerg
Said Business School
University of Oxford

 

Double confirm StanChart’s rogue bank & PAP apologist is a fool

In Banks, Hong Kong, Temasek on 10/12/2014 at 11:10 am

Remember a “PAP is always right” man KPKBing when StanChart was charged that the reulator was a “rogue regulator”. StanChart then made the dean of LKY School look dumb, really dumb, by pleading guiltyy

Double confirm that StanChart is a rogue bank and the PAP apologist is a fool because now: The management of Standard Chartered is facing renewed pressure after being placed under fresh scrutiny by US regulators.

Two years after being fined more than £400m for breaching US sanctions towards Iran, the bank revealed that a two-year deferred prosecution agreement (DPA) that was imposed at the time was being extended for three years.

The US authorities are now investigating whether Standard Chartered breached its sanctions rules beyond 2007, the period when the previous offences for which the bank was penalised took place.

http://www.theguardian.com/business/2014/dec/10/standard-chartered-management-us-regulators-investigation-sanctions

Looks like Santa didn’t bring Ho a nice Christmas present, giving her a turd instead. Juz look at share price chart from FT. [Chart added at 11.30 am]

Standard Chartered share price

Big StanChart shareholder still likes stock

In Banks, Emerging markets, Temasek on 02/12/2014 at 4:17 pm

The second biggest shareholder in Standard Chartered (after Temasek with around 27%) is standing by the embattled Asia-focused bank, continuing to buy the stock and insisting that nothing is “fundamentally wrong” with the company.

Martin Gilbert, chief executive of Aberdeen Asset Management PLC, said that funds run by his company have been “buyers of the stock in a fairly modest way,” despite a series of profit warnings that have sent Standard Chartered’s share price down 33% this year.

“We do not think there is anything fundamentally wrong with the bank,” said Mr. Gilbert, during a call to discuss Aberdeen’s results. He said that revenue growth had slowed but added that he would prefer the bank’s existing management team, headed by chief executive Peter Sands, to “sort it out” rather than looking for a replacement: “They have to really get on with it, I would say, and have a look at the costs.”

Aberdeen owns 7% of the bank, according to Factset, and, as of Oct. 31 2014, that had not changed since last year. Some Aberdeen funds have “topped up” their positions this month however, according to an Aberdeen spokesman.

The value of Standard Chartered shares held by the emerging markets-focused fund manager slid from a peak of $5.1 billion in February last year to $2.6 billion in October, according to Factset data. Part of that was due to an 8% reduction in the size of Aberdeen’s stake at the end of last year, but most was due to the bank’s falling share price.

http://blogs.wsj.com/moneybeat/2014/12/01/aberdeen-asset-management-stands-by-embattled-standard-chartered/

Temasek is one of the shareholders pressing for a change of mgt, other reports claim.

 

StanChart credit rating downgraded! First time in 20 years!

In Banks, India, Indonesia, Temasek on 29/11/2014 at 10:20 am

But no need to panic or curse Temasek*: Standard & Poor’s says bank is going through times but it still among world’s most creditworthy commercial lenders.

http://www.theguardian.com/business/2014/nov/28/standard-chartered-credit-rating-downgraded

It has some big exposures to heavily indebted clients, such as India’s Ruia brothers, who control the Essar Group, and Indonesian billionaire Samin Tan.

Honest mistakes.

—-

But the facts won’t stop Philip Ang, TOC’s and TRE’s star analyst, from cursing and ranting: he’s so bad that in a piece on a GIC, London investment, he left out the rental yields out of his calculation because he said that the income was “peanuts” (my word, not his). Well commercial property yields are a gd 6%, and have been as high as 8% in some yrs recently.

 

Scholar, ex-general still cannot stop NOL from sinking

In Logistics, S'pore Inc, Shipping, Temasek on 25/11/2014 at 4:41 am

At the end of October, NOL announced: that losses continued in the third quarter with the company $23m in the red compared to a net profit of $20m a year earlier, hit by port congestion in Southern California.

“We see a slowdown in emerging markets, partly driven by a lower need for raw materials from China. Europe – it’s very slow growth, if any, at the moment, and there’s no reason to expect a big change here,” said Nils Andersen,Maersk’s chief executive.

Revenues for the third quarter were flat at $2.06bn. For the first nine months of 2014 NOL lost $174m, compared to a $61m profit in the same period last year that included a one time gain from the sale of its headquarters building.

NOL claimed cost savings of $290m so far this year but these had been “largely offset” by lower rates, lower volumes and increased costs for port congestion.

http://www.seatrade-global.com/news/americas/nol-stays-in-the-red-port-congestion-hits-liner-arm-apl.html

But about a week later, FT carried this report: Denmark’s largest company by sales reported better than expected profits in the third quarter and lifted its profit outlook for Maersk Line, its container shipping business.

Maersk has bucked the trend in a container shipping industry dogged by overcapacity, losses and weak demand. Thanks to aggressive cost cutting and lower use of fuel, Maersk Line is by far the most profitable container group.

Maersk Line estimates its operating margin, which was 8.2 per cent in the second quarter, was 8.5 percentage points higher than the average of its rivals.

It lifted it again in the third quarter, posting an operating margin of 10.5 per cent, and leading Maersk Line to boost its guidance for the year for net profits to more than $2bn compared with $1.5bn previously. Net profit in the third quarter rose by a quarter to $685m.

“The days of rapid growth in containerised trade are over. We have to be happy as an industry that we are still growing . . . But we can still make good business,” said Mr Andersen.

But Maersk is more than just a container shipping group as the conglomerate has sought to emphasise its other businesses in recent years including oil exploration and production, port terminals and drilling rigs.

….

AP Møller-Maersk lowered its forecast for growth in global trade as the owner of the world’s largest container shipping line said a slowdown in emerging markets and Europe was weighing on demand.

The Danish group, seen as a bellwether for global trade as it carries 15 per cent of all seaborne freight, said demand had slipped in the third quarter compared with the start of the year and was now expected to increase by 3-5 per cent this year, down from 4-5 per cent.

So having a scholar, ex-SAF general and ex Temasek MD hasn’t done any favours for NOL, or S’pore Inc. On his watch (to be fair in really bad weather, he crashed NOL onto the rocks. Still in charge despite that , he has repeadely failed to stop the water from coming in.

The red ink continues to flow with plans to sell its APL Logistics unit in a sale that could fetch at least US$1 billion (S$1.27 billion).

Btw, local broker calls NOL a buy: http://www.ihsmaritime360.com/article/15494/neptune-orient-lines-gets-buy-rating-on-cheap-valuation.

Below shows trade flows across the Pacific. Maersk btw is based in Denmark and its traditional strength is the Asia, Europe trade. But it still dominates global shipping.

 

http://www.economist.com/blogs/graphicdetail/2014/11/daily-chart-9

StanChart bosses apologise to shareholders

In Banks, Temasek on 13/11/2014 at 1:48 pm

Top bosses at Standard Chartered admitted the bank’s performance had been disappointing as they announced plans to close 100 branches in a $400m (£250m) cost-cutting drive to win back support from disgruntled investors.

The admission was made as the bank’s top management team began three days of presentations to investors, who have endured a 30% drop in share values. There are also concerns about whether the bank has enough capital.

At the start of the three-day presentation, the new finance director, Andy Halford, said: “We recognise our recent performance has been disappointing and are determined to get back on to a trajectory of sustainable, profitable growth, delivering returns above our cost of capital.”

http://www.theguardian.com/business/2014/nov/11/standard-chartered-bosses-bid-calm-investor-fears

PAP like StanChart not broken, just in for 10-year service?

In Political governance, Temasek on 10/11/2014 at 4:26 am

The chairman of StanChart said to 300 of the bank’s senior managers in Singapore last week, “We’re making changes. But all you have to do is go out in the field, go out into our markets, and you very quickly realise that it’s not broken. It just needs to go in for its 10-year service and we are in there for that 10-year service now … it’s a question of going through this difficult period, gritting our teeth”.

He said: “Humility is a very important word. It’s very important that we recognise we make mistakes”.

http://www.theguardian.com/business/2014/nov/07/standard-chartered-chairman-john-peace-bank-humility.

(And Chairman Sir John Peace was in Singapore last week insisting the bank is not ‘broken’. Three profit warnings say otherwise  http://www.theguardian.com/business/2014/nov/09/standard-chartereds-charm-offensive-may-not-save-sands)

Well the PAP has been making changes, gritting fangs and sheathing claws since 20111: spending more of our money to make life more comfortable for ourselves.

https://atans1.wordpress.com/2013/08/16/analysing-pms-coming-rally-speech/

https://atans1.wordpress.com/2013/10/04/trust-has-to-regained-pm/

But it doesn’t ever do humility (OK PM did apologise once during a 2011 GE rally speech, but hey he had an election to win). It won’t even admit that the PAP’s Hard Truths need servicing every now and then. It’s all a question of new blood to uphold Hard Truths.

Taz the impression I get after this

— “Today is the time to re-dedicate ourselves to the party and to Singapore. In the next 60 years, the path ahead will be different.”

— “One thing has not and will not change, that is the need for good leadership. The PAP commits to provide the leadership and serve Singaporeans better…The PAP will always be on Singapore and Singaporeans’ side.”

— “The PAP will always do its best for Singapore and Singaporeans.”

PM made these statement at the Victoria Concert Hall on 7 Nov in celebration of PAP’s 60th anniversary.Victoria Concert Hall was the venue because this was where the PAP launched way back in 21 November 1954, with its inaugural political meeting held there.

So because the PAP is not prepared to service its Hard Truths to see if they need throwing out, we are stuck with

—  a CPF annuity where the Standard Plan is lousy, really lousy https://atans1.wordpress.com/2014/08/17/will-pm-tonite-give-peace-of-mind-on-cpf-life-standard/

And where it’s our money but CPF Life solvency is our problem –https://atans1.wordpress.com/2014/08/17/will-pm-tonite-give-peace-of-mind-on-cpf-life-standard/

https://atans1.wordpress.com/2014/08/17/will-pm-tonite-give-peace-of-mind-on-cpf-life-standard/

— Medisave’s incentive to spend on medical insurance that may not be needed

https://atans1.wordpress.com/2014/07/08/daft-sinkies-dishonest-insc-agents-or-medisave-sucks/

— MediShield being probably not a value proposition

https://atans1.wordpress.com/2014/07/14/medishield-totful-tots-on-loss-ratio-to-determine-premiums/

— Medishield’s lifetime limit [This item added at 7.00am]

https://atans1.wordpress.com/2014/03/03/no-needed-three-fixes-to-show-the-pap-really-cares/

— immigration

https://atans1.wordpress.com/2013/02/15/population-white-paper-2030-will-resemble-1959/

The Hard Truths behind immigration:

— more people means better growth; and

— S’poreans are daft and lazy.

The Hard Truth behind the other difficulties S’poreans face listed above is that govt should not spend tax-payers money on “welfare”, only on toys for the military and govt running expenses (which includes ministers’ and civil servants salaries).

 

 

StanChart directors to push for chief’s succession plan

In Banks, China, Corporate governance, Emerging markets, Hong Kong, Temasek on 01/11/2014 at 11:06 am

Above is FT’s headline for today.

Ho, Aberdeen, Blackrock and L&G baring their fangs? TRE ranters and other anti-PAP paper activists, pls note that Temasek has been pushing for a succession plan for some time.

Standard Chartered data

But they can rejoice ’cause  sharesclosed at £9.39 on Friday – down from £18 less than two years ago.

They will be celebrating.

Related:

https://atans1.wordpress.com/2014/10/29/lousy-set-of-results-from-stanchart/

https://atans1.wordpress.com/2014/10/31/stanchart-gives-ho-more-problems/

 

StanChart gives Ho more problems

In Banks, China, Corporate governance, Hong Kong, Temasek on 31/10/2014 at 10:12 am

Is StanChart a rogue bank?

Standard Chartered Plc (STAN) fell for a fourth consecutive day in London after U.S. prosecutors reopened investigations to determine whether the bank, which entered into a deferred prosecution agreement in 2012, withheld evidence of Iran sanctions violations.

The U.S. Justice Department, Manhattan District Attorney Cyrus Vance Jr. and Benjamin Lawsky, superintendent of New York’s Department of Financial Services, are all reopening their original inquiries into the London-based lender to determine whether it intentionally withheld information from regulators before the 2012 settlements, according to two people briefed on the matter, who asked not to be identified because the probes are confidential.

http://www.bloomberg.com/news/2014-10-30/standard-chartered-bank-of-tokyo-said-getting-new-review.html

Temasek wants clear succession plan at StanChart

https://atans1.wordpress.com/2014/10/29/lousy-set-of-results-from-stanchart/

Lousy set of results from StanChart

In Banks, China, Corporate governance, Emerging markets, Hong Kong, Temasek on 29/10/2014 at 2:23 pm

Standard Chartered has announced a 16% fall in operating profit because of a restructuring of its South Korean business and an increase in bad loans.

The Asia-focused lender said pre-tax profits fell to $1.5bn (£930m) in the July-to-September quarter compared to the same period a year ago.

Standard Chartered also warned full-year earnings would fall because of weak trading activity.

http://www.bbc.com/news/business-29797961

FT reports that some of the major shareholders have been pressing for the CEO to be sacked if things don’t improve soon. It also reports that Temasek  is “pressing for a clear plan of succession”.

Standard Chartered data

 

 

PM talks cock about “private” sector

In China, Temasek on 14/09/2014 at 6:57 am

The private sector-led, Government backed Guangzhou Knowledge City (GKC)* is a good model for future Singapore-China projects, said Prime Minister Lee Hsien Loong on Friday (Sep 12).

… Mr Lee said he was happy with the progress, six years after he first discussed the project with provincial leaders … the private sector-led GKC is a different model that Singapore is “trying out” after the Suzhou Industrial Park and Tianjin Eco-city, both government-to-government projects. (CNA on Friday)

Funnily the private sector leadership is provided by Temasek-owned company Singbridge who is in a j/v and the southern Chinese city of Guangzhou.  Singbridge is 100% owned by Temasek, 100% owned by the Minister for Finance. Not even the fig-leaf of a SGX-listed TLC like Keppel or SIA.

And PM went to Catholic High and NJC? But then Yaacon was from RI (see tom)

—-

*”The hurdle for government-to-government projects like Suzhou and Tianjin will be higher in future, so I think this (GKC) is a good model that we should explore going forward,”

“But there has to be a balance between private sector leadership and government support, and there has to be market demand for what’s being offered by the project” …

Located 35 kilometres from Guangzhou city centre, work is underway to turn the Guangzhou Knowledge City, currently a 123 square-kilometre site into a future magnet for industries like pharmaceuticals and info-comm technology, part of local authorities push for so-called high end industry.

 

Problems at Temasek’s StanChart & DBS/ OCBC ovepaid for HK bank?

In Banks, China, Emerging markets, Hong Kong, Temasek on 30/06/2014 at 4:50 am

Standard Chartered has said first-half operating profits will be 20% lower than a year earlier, blaming a slump in income from its financial markets business.

The warning comes only three months after the Asia-focused lender reported its first fall in annual profits for a decade.

The UK bank had been expected to show a modest bounce-back this year.

But it said tougher regulations and low market volatility had hurt revenues.

Standard Chartered said its interest rate and foreign exchange trading had been particularly hit.

Chirantan Barua, an analyst at Bernsteinm said: “Cyclical headwinds are yet to arrive in full force in the bank’s two key markets – Hong Kong and Singapore. Not that Korea or India is out of the woods either.

“Pack that in with a challenging and uncertain capital regime that won’t be resolved until the end of the year and you have a great deal of uncertainty around the stock.”

http://www.bbc.com/news/business-28031504

StanChart shows the peril of investing in a stock listed overseas overseas that operates internationally. When profits were gd, sterling was weak against all major currencies. When sterling is strong, profits no gd. Note the value of sterling is irrelevant to the underlying profits or losses of  most of bank’s international operations.

——

ON AN afternoon in early summer a prospective customer walked into the gleaming new branch established in Shanghai’s free-trade zone by DBS, a Singaporean bank that, like many of its international rivals, has long touted China’s great promise for its business. The lobby was empty, save for a guard playing a video game. A log showed that the branch was attracting just two or three visitors a day. DBS remains optimistic about China and says that most of its free-trade-zone transactions are routed through other locations. But the torpid atmosphere at the branch points to foreign banks’ struggle to crack open the Chinese market.

—–

To be fair to DBS its New Citizen CEO is not like the FT CEO of OCBC who may have blundered.

OCBC is offering to buy Wing Hang Bank’s shares for 125 Hong Kong dollars (US$16.12) each, in a big bet on China’s sustained economic growth. OCBC hopes the deal will springboard its growth into mainland China through the Hong Kong bank’s cross-border operations, and give it a foothold in Macau.

OCBC and Wing Hang Bank, one of Hong Kong’s last remaining family-owned lenders, began discussions on a possible deal late last year, and in January entered exclusive talks (after ANZ and UOB balked at the family’s asking price), which were extended twice as they argued over price.

The most recent comparable transaction (and bargaining benchmark for the family), the 2013 sale of Chong Hing Bank, went for 2.35 times book value including the value of a special dividend related to Chong Hing’s real estate. Accounting for the increase Wing Hang ascribes to the value of its property, the OCBC offer is closer to 2 times book value, a discount, compared to the Chong Hing deal, considering Wing Hang’s return on equity averaged 11.3% for the past three years, versus 7.8% for Chong Hing, according to Capital IQ.

Still OCBC shareholders were not that happy and its share price suffered.

What is unknown is the value of Wing Hang’s Hong Kong real estate, on some of the busiest shopping streets in the world. These could be worth even more than the bank says. A government index of Hong Kong retail properties has risen 400% over the past decade. Yet the company’s revaluation over the acquisition cost of the property is less than 100%.

If enough of Wing Hang’s minority shareholders refuse the price on offer, however, OCBC might prefer to raise it or offer* or bear the cost of maintaining the Wing Hang listing, and the cost of failing to fully integrate the bank.

Update at 6’00am: Here’s someone who thinks OCBC got sold a dog.

Wing Hang gives it greater opportunity to finance trade between China and other parts of Asia such as Malaysia and Indonesia, where it already has a foothold. Wing Hang’s strong funding base – loans were just 73 percent of deposits at the end of last year – is another advantage, as is its ability to capitalise on the yuan’s growing international popularity. About 17 percent of Wing Hang’s deposits are currently in the Chinese currency.

Nevertheless, the purchase brings risks to OCBC investors. China’s economic slowdown is creating credit wobbles, while Hong Kong’s property boom is bound to have led to some lending excesses. Meanwhile, rising interest rates in the United States could reverse the cheap deposits that have flowed into both Hong Kong and Singapore in recent years. Shareholders, who will probably be asked to help finance the purchase, may pay a high short-term price for OCBC’s long-term China ambition.

 http://blogs.reuters.com/breakingviews/2014/04/01/ocbcs-chinese-ambition-comes-with-hefty-price-tag/

 ————

*OCBC has said the bid, a 50% premium to the then stock price, is generous.

PM talking cock? Impossible to know if trade-offs are reasonable, fair or appropriate

In Political governance, Temasek on 29/06/2014 at 4:49 am

(Or “Shades of Orwell’s Big Brother?”)

Came across this thoughtful piece by Andy Mukherjee over the weekend. It explains clearly the issues and trade-offs Singapore faces in building our ideal society, while ensuring that Singaporeans have jobs and economic opportunities to build better lives and a brighter future.
As the article points out, we do enjoy important advantages compared to other countries, but it will still not be easy. There are serious trade-offs, which we must be willing to acknowledge and address. If we just pretend that everything can be better, and no hard choices are necessary, we will get into trouble. Mukherjee calls this “please-all economics”, and expresses confidence that Singaporeans are too pragmatic to fall for it. We must make sure that he is right. – LHL on FB two weeks ago

Piece PM raving about: http://in.reuters.com/article/2014/06/12/breakingviews-singapore-unrest-idINL4N0OQ07F20140612

But if we don’t know how much money we have, and how much are the returns the reserves are making for us, how can we judge if the trade-offs PM and his govt make are the right ones? After all he has as gd as admitted his govt got immigration, welfare, public tpt and public housing policies wrong by changing (sorry tweaking or is it evolving?) these policies.

And these were policies significant numbers (self included, and I note not M’sian new citizen Pussy Cat Lim who confines herself to general banalities) had been warning against for yrs. We were called “noise”, until the govt decided to change these policies.

This is what one LHL said many yrs ago when he was DPM and economic and financial czar:

The Singapore government, May 16, defended the secrecy surrounding its financial reserves of more than US$100 billion, saying it was not in the national interest to disclose details.
The veil of secrecy was necessary to protect the Singapore dollar from speculative attacks, Deputy Prime Minister Lee Hsien Loong said in parliament.

“It is not in the people’s interest and the nation’s interest to detail our assets and their yearly returns,” he said.http://www.singapore-window.org/sw01/010516a3.htm

This remains the govt’s stand.

And if I remember correctly, his dad once said that info reserves had to be kept a secret so that S’poreans couldn’t ask for more welfare, which they would if they knew how much money S’pore had. Readers correcting me or referencing the quote appreciated.I can’t find it via my googling.

In this mobile internet age, it is sad and self-defeating that the the PM and the PAP govt (ministers and civil servants) cling to the Leninist system that all information is political and can be designated a “state secret” at any time if the govt decides it does not help to bolster the govt’s or party’s own legitimacy and power.

BTW flaw in AndyM’s analysis which disqualifies from being an unbiased analyst

There is a fifth way which Mr Mukherjee has not considered. It is to reduce and reallocate government expenditures. In particular, the government can consider reduce defence spending so as to increase spending on welfare. This is a classic “Gun vs Butter” resource allocation problem studied in elementary economics. At present, Singapore is spending nearly a quarter of the $57 billion estimated government expenditures for FY2014 on defence alone (23% at $13 billion) … [TRE]

Maybe he aiming to be a PAP minister? He is a FT based here.

He did serious weight-lifting in 2011 at a Temasek briefing:First of all, congratulations on beating the sage of Omaha because [ … ] you seem to have out performed Warren Buffett on every horizon. He was BSing as Temasek and Berskshire cannot be compared ’cause Berkshire is listed, Temasek is not.

And if you think PM’s remarks on trade-offs when juxtaposed with his remarks  on the need for secrecy on reserves are Orwellian, his press secretary’s remarks in relation to Roy Ngerng are even more chilling:

… What is at stake is not any short-term positive or negative impact on the government, but the sort of public debate Singapore should have. When someone makes false and malicious personal allegations that impugn a person’s character or integrity, the victim has the right to vindicate his reputation, whether he is an ordinary citizen or the prime minister. The internet should not be exempt from the laws of defamation. It is perfectly possible to have a free and vigorous debate without defaming anyone, as occurs often in Singapore. Emphasis mine

Foster public debate by suing for defamation? Come on, pull the other leg, it’s got bells on it. I’m reminded of the slogans in 1984:

WAR IS PEACE
FREEDOM IS SLAVERY
IGNORANCE IS STRENGTH

 

 

 

SIR – I refer to the article “A butterfly on a wheel” (June 13th). You referred to an “alleged ‘serious libel’” by Roy Ngerng. This is not an allegation. Mr Ngerng has publicly admitted accusing Lee Hsien Loong, the prime minister, of criminal misappropriation of pension funds, falsely and completely without foundation. After promising to apologise and to remove the post, Mr Ngerng did the opposite; he actively disseminated the libel further. This was a grave and deliberate defamation, whether it occurred online or in the traditional media being immaterial.

What is at stake is not any short-term positive or negative impact on the government, but the sort of public debate Singapore should have. When someone makes false and malicious personal allegations that impugn a person’s character or integrity, the victim has the right to vindicate his reputation, whether he is an ordinary citizen or the prime minister. The internet should not be exempt from the laws of defamation. It is perfectly possible to have a free and vigorous debate without defaming anyone, as occurs often in Singapore.

Chang Li Lin
Press secretary to the prime minister
Singapore

– See more at: http://www.economist.com/news/letters/21604530-ukraine-singapore-employment-housing-food-trucks-john-birch-society-football-0#sthash.lPfPUP1T.dpuf

 

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

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

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

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

($= US$)

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

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

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

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

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

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

— more hospital beds (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.

Investing in Indonesia is like eating puffer fish/ TRE readership

In Humour, Indonesia, Temasek on 29/03/2014 at 7:01 am

What do I mean by the former?

S$ is a strong currency, the rupiah a weak one; but this yr the rupiah has outpeformed

The rupiah has risen 7 per cent against the US dollar this year, making it the world’s strongest performing currency, while the Jakarta stock market is also rallying, now up 10 per cent. Yields on 10-year government bonds have also come down to 8 per cent, having jumped as high as 9.2 per cent last summer – another sign of fresh enthusiasm for Indonesia’s growth story. FT on 13th March).

Gd that we have a neighbour liddat as China’s growth slows. And Indonesia’s a MINT.

And whatever TRE posters* and Chris Balding say, Temasek has made gd money in Indonesia (think telco and banking, though it has yet to exit the latter) despite a hostile political environment. Money talks.

Too bad about its aggressive, civilian-killing armed forces that would loot and plunder S’pore if given half a chance. Whether we need to spend 25% of the Budget on defence is open to reasoned debate (something which the PAP govt rubbishes) but there is no doubt that we should continuing be a poisonous shrimp to deter Indonesian generals and admirals who want to loot and plunder. The Indonesian govt does not control the military, as the constant outbreaks of internal lawlessness (including the murder of civilians) by the armed forces shows.

Example: Two Indonesian ministers have expressed regret over the inappropriate conduct by two Indonesian marines who had posed as the MacDonald House bombers at the Jakarta International Defence Dialogue exhibition on Wednesday.

In response to media queries, a statement from Deputy Prime Minister Teo Chee Hean’s office said Mr Teo confirmed that Indonesian Coordinating Minister for Political, Legal and Security Affairs, Air Chief Marshal (Ret) Djoko Suyanto telephoned him on Friday afternoon regarding the incident.

Coordinating Minister Djoko expressed regret over the inappropriate conduct by the soldiers, and assured Mr Teo that there was no such policy to do so.

Those views were also repeated by Indonesian Defence Minister Purnomo Yusgiantoro, who spoke with Defence Minister Ng Eng Hen on the phone on Friday.

Dr Purnomo added that the Chief of Staff of the Indonesian Navy, Admiral Marsetio, had launched investigations to determine who was responsible for the inappropriate act. (CNA)

Or maybe juz two-timing? What do you think?

Taz another problem. The Javanese ruling elite loves to intrigue . Raffles knew what to do when they were two-timing, he sent in the army.

As to the quality of ministers: Indonesia’s communications minister, who has campaigned against pornography, has caused an uproar on social media after he followed a Twitter porn account …

http://www.bbc.com/news/blogs-news-from-elsewhere-26680779

Bottom line: Indonesia is a difficult place to invest in (as I can personally tell you), but get it right (I didn’t) and it’s life eating puffer fish. Can die, if not careful.

Related article: http://kementah.blogspot.sg/2014/03/not-business-as-usual-for-indonesia.html

———-

*Yes, TRE readers have written to me telling me that the majority of TRE readers are not losers like “oxygen” and those who call me names, but are “Calm Persistence” and “Hard-pressed Anxiety” types). They dislike being associated with losers: they are hard-working S’poreans who think that the PAP has betrayed them. As to why they don’t fund TRE, they say that that as typical S’poreans, they are free-loaders by nature and that I’m wrong to associate “Calm Persistnce” and “Hard Pressed Anxiety” with community spirit and generosity of spirit. . If they were not free-loaders and apathetic, then TRE would not be the voice of S’poreans. Err, kinda confusing. I got to think thru this paradox.

Olam: Hang on, buy for the ride?

In Africa, Commodities, Temasek on 18/03/2014 at 4:50 am

(Or “Temasek and Ho Ching haters getting more frus“)

Methinks that all those posters on TRE’s piece on Olam are banging their private parts real hard and crying in frustration http://www.tremeritus.com/2014/03/15/temasek-leads-consortium-to-buy-out-debt-ridden-olam/ . They missed making $ and are also upset that Temasek made gd (but peanutty ) money supporting Olam. Even those who pretend rationality while hating all things PAP ( s/o JBJ and Chris Balding?) can only sputter that if Olam is so gd, why buy now not earlier? May I suggest that they read FT’s Lex (behind paywall): squeezing the shorts leh; and Breakingviews (see below).

My tots on the stock: don’t tender the shares. Let’s go for the ride. At worse, kanna bot out if delisted. If buying lose only “peanuts” if kanna bot out. Remember my previous tots which TRE republished late last yr?

Last chance to buy Olam?

More bull points to add to this:

– When Olam released its quarterly results in early November, it showed it  had generated positive free cash flow – the first time in four years for a seasonally weak quarter.

Its executive director of finance and business development A Shekhar told analysts and reporters: “We’re very pleased that we’re striking the right notes on both objectives of profit growth as well as free cash-flow generation.”

– Ang mohs are still sceptical about the parts of the stock’s biz model.

– But they bulls on Africa and Olam got an edge there. Africa is now seen a destination mkt, not juz an exporter of commodities i.e. origination mkt:

The commodities houses are attracted to the African destination business for three reasons. First, demand is rising fast, in many cases at double-digit annual rates. Second, many African governments subsidise basic commodities such as petrol and wheat, in effect guaranteeing a return to the traders. Third, most African countries lack the infrastructure needed to import raw materials, from silos for storing wheat and rice to terminals for unloading petrol. The commodities houses say that, as they build this infrastructure, they will be able to secure a market and benefit from years of rising demand. (FT report on Africa dated 10 November 2013)

https://atans1.wordpress.com/2013/11/26/temasek-tales-tlc-overpaid-olam-cheong-wont-read-this-in-tre-toc/

This is what the deal’s all about (other than squeezing the shorts’ balls, hard real hard):

The most immediate beneficiary of the buyout is Olam’s creditworthiness. Despite Temasek’s minority shareholding, the company has faced persistent queries about its debt load. That’s particularly damaging for a trading house like Olam, which relies on the confidence of its counterparties. In future, creditors will view Olam as an extension of its sovereign parent.

http://blogs.reuters.com/breakingviews/2014/03/14/temasek-buyout-throws-sovereign-weight-behind-olam/

My next piece of advice to those TRE readers who keep on cursing Temasek and its CEO but who end-up banging banging their balls in frustration: Go analyse SMRT.

Trmasek and Ho Ching haters should come up with new lines of attack. The world has moved on from the crisis of 2007-2009. The recovery of global markets means that post Temasek’s losses on ABC Learning, Barclays and Merrill Lynch/BOA, performance has been in line with the recovery in world equity markets. Two of its dogs are dogs no more:  Shin is 50% up from its purchase price (though how to exit is an issue), and go check the price of Chesapeake. And the glee over Olam has turned to tears as Olam powers ahead, giving Muddy Waters a bloody nose. Big playpen bully has met a bigger bully. True blue S’poreans and xenophobes should be cheering Ho Ching on, not cursing her. But then hatred of the PAP is often irrational.

Temasek’s Asean tales

In Temasek, Vietnam on 22/02/2014 at 4:23 am

This week’s Asean’s round-up is all about Temasek or its TLCs.

Singapore state investor Temasek Holdings Pvt Ltd TEM.UL is seeking to sell its $3.1 billion stake in Thai telecom company Shin Corp INTUCH.BK, according to people familiar with the matter, and has approached its SingTel (STEL.SI) unit as a possible buyer. But the troubles in Thailand have put an end to the talks.

TRE and TOC readers will be banging their balls when they learn: The Temasek stake in Shin Corp, founded by former Thailand prime minister Thaksin Shinawatra, is worth $3.1 billion by current market value.

Shin Corp’s shares now trade more than 50 percent above the price paid in 2006 by a Temasek-led consortium, that included Chinese-Thai businessman Surin Upatkoon, when it bought 96 percent of the Thai firm for a total of $3.8 billion.

As for SingTel:

“At a fair price such a deal would make sense for SingTel,” Chris Lane, senior analyst at Sanford C. Bernstein in Hong Kong who covers Asia-Pacific telecommunications. SingTel is 52 percent-owned by Temasek.

Shin Corp owns 40.5 percent of Thailand’s biggest mobile telecoms company, Advanced Info Service Pcl ADVANC.BK. SingTel already has a 23 percent stake in AIS: Adding the Shin Corp stake would cement its position in a bigger market and offset sluggish growth in mature economies where it’s also present, like Australia.

“SingTel executives are involved in the day-to-day operations of the company AIS,” said Bernstein analyst Lane. “Buying the stake from Temasek avoids the possibility of another ‘telco’ securing a significant interest in AIS.”

http://www.reuters.com/article/2014/02/18/us-temasek-shincorp-singtel-idUSBREA1G1H520140218

FPT Corp, Vietnam’s largest publicly traded telecommunications and software company, has asked Temasek to help it identify a Singapore technology company for acquisition to boost sales overseas, the Bloomberg news agency reported.

FPT will spend as much as US$20 million (S$25 million) on a Singapore acquisition, Chief Executive Officer Bui Quang Ngoc said in an interview on Wednesday. The company, which had sales of 28.6 trillion dong (S$1.7 billion) in 2013, seeks to more than triple revenue from overseas to US$400 million by the end of 2016, co-founder Mr Ngoc, who took charge in July, said in Hanoi. “Singapore is a very attractive market,” Mr Ngoc said. “If we can be successful in Singapore, it means we have enough experience to do it in other countries.”

FPT is looking to acquire a Singapore company that specialises in software services such as inventory management, order processing and employee payroll, said Mr Duong Dung Trieu, chief executive officer of FPT Information System, a unit that contributes 25 per cent of the parent’s pretax profit.

The company plans to make the acquisition in Singapore “as soon as possible,” Mr Ngoc said. Temasek holds less than 5 per cent stake in FPT, according to the Vietnamese company.

Finally airport services and catering firm SATS (a listed TLC) agreed to buy a 41.65 per cent stake in Indonesian aviation and food service provider Cardig Aero Services for 1.1 trillion rupiah (S$118 million) to grow its business in South-east Asia’s largest economy.

Indonesia is a priority market said SATS. The country’s topography and a fast-growing economy and middle-class population will continue to drive greater demand for high-quality food and travel, it said. “CAS is an attractive investment opportunity in our core business which will generate sustainable value for our customers, employees and shareholders as Indonesia continues to grow,” said Mr Alexander Hungate, President and Chief Executive Officer of SATS.

And he’s right about Indonesia: http://www.economist.com/news/finance-and-economics/21596989-how-worlds-fourth-most-populous-country-weathering-emerging-market

StanChart losing its shine

In Banks, Emerging markets, Temasek on 22/12/2013 at 7:08 am

Standard Chartered had a bad start to the hols. Last Monday, its shares fell sharply on the possibility that it might call for a rights issue in the wake of weakish results. They’ve since recovered but there was another sharp fall on Fridaty, albeit from a much recovered position.

It has also been forced to strip its finance boss of his responsibilities to oversee the lender’s risk division following pressure from the Bank of England.

Richard Meddings, who has been group finance director of Standard Chartered since November 2006, had to hand over governance responsibility of risk to Peter Sands after the Prudential Regulation Authority said it was concerned with Meddings holding two conflicting roles, according to news reports.

In particular, the PRA, the Bank of England’s financial watchdog, was concerned with the potential conflict between Meddings’ finance responsibility and his duty to oversee risk operations.

All this against the background that it is no longer  an ang moh favourite because emerging markets are no longer in fashion. Their economies are slowing while the Western economies are recovering. And the wall of money is returning to the West.

BTW, those readers of TRE who bitch that Temasek lost money on StanChart and say that I didn’t know this fact are daft: all they needed to do is to google up StanChart’s 10 yr price. But if anyone wants to see the numbers: here’s why.

 

Temasek’s had gd yr on US energy investments

In Energy, Temasek on 17/12/2013 at 4:39 am

Many moons ago TRE told us that Temasek owns bonds in Chesapeake that are convertible at US$27 (issued when stock was around 23-25). And that the bonds were deeply underwater: the shares went as low as below 15 (Sorry the TRE link no longer is working ’cause of TRE’s new system of trying to get money from stone) Related post: https://atans1.wordpress.com/2012/09/13/gd-news-for-temasek-on-chesapeake/

Well over a yr later, the shares closed yesterday at  26.79, having traded as high as 27.50 in recent months. Let’s see if TRE updates its story on Chesapeake. Suspect pigs will fly first. What say you Richard, TeamTRE?

There’s more. On 16 August, MediaCorp’s freesheet (ST Lite) reported: Temasek Holdings has sold its 4 per cent stake in Cheniere Energy after a surge in the share price of the United States natural gas importer, just 15 months after it unveiled the purchase as part of its “longer-term interest” in the energy sector.

The move is a sign of Temasek’s willingness as a self-professed “active investor” to realise profits. But it also comes after Temasek last year billed the stake as part of a broader plan to cooperate with Cheniere and US private equity group RRJ Capital to take advantage of the US shale gas revolution.

“The shares had a decent run over the past year,” said Mr Enrico Soddu, an analyst at the London-based Institutional Investor’s Sovereign Wealth Center. “Temasek just seized the opportunity to make a solid profit.”

Temasek sold 9.2 million Cheniere shares either directly or through affiliates in the second quarter, valuing the stake at US$257 million (S$326.2 million), according to a quarterly filing of its US stock holdings with the US Securities and Exchange Commission.

Shares in Cheniere had climbed as much as 200 per cent by the end of the second quarter after Temasek and RRJ announced in May last year they would spend about US$468 million on an equity investment in Cheniere.

Temasek and RRJ were to have formed a marketing company with Cheniere to sell liquefied natural gas (LNG) in Asia in a bet on rising shale gas production and exports to the region.

Where S’porean traits produce world-class TLCs

In Energy, Indonesia, Temasek, Vietnam on 28/11/2013 at 6:25 am

More to irritate Temaeek and S’pore (self) haters, especially TRE readers*. There are advantages to S’poreans’ reputation as the Prussians of the East: hardworking, careful, conscientious and mindlessly efficient. These are very qualities that make Keppel and SembCorp world beaters in rig-building.

Singapore’s two main yards, Keppel and SembCorp Marine, have also invested heavily in quality and efficiency. They specialise more in deep-sea rigs than in drill-ships and carriers. Keppel, the bigger of the two, is building a record 20 such monsters this year; next year it will deliver the first of three giant, $600m “jack-up” rigs (ones that are floated into place then jacked up on their legs).

Time is money

The Singaporeans are also good at building things on time, which is vital in an industry where late delivery can cost the operators of rigs and drill-ships over $500,000 a day. Over the past five years, rigs ordered from Keppel and SembCorp were, on average, delivered ahead of schedule, whereas Chinese yards delivered 50-250 days late, says IHS Petrodata, a research firm.

http://www.economist.com/news/business/21590496-korean-and-singaporean-yards-have-adapted-well-chinas-challenge-deeper-better

As to China’s cost advantage, having facilities in Indonesia helps provide cheap labour for SembCorp’s rig building biz. Keppel too has an Indonesian operation, though its tiny compared to SembCorp’s.

And with Vietnam having problems with China over maritime boundaries, one wonders if Chinese built-rigs are allowed in its waters. Remember, energy cos are exploring for oil off Vietnam. Still, the waters do not require the sophisticated rigs built by these TLCs.

Related post: https://atans1.wordpress.com/?s=Temasek+Fab+5

*Though TRE readers will be pleased that these TLCs are not led by ex-generals or ex-Temasek MDs. The CEO of Keppel is a scholar, but I’m not sure of the background of CEO’s SembCorp. But both have worked that these TLs for many yrs. They were not parachuted in like in NOL to teach executives to suck eggs.

Temasek tales: TLC overpaid?/ Olam: Cheong?/ Won’t read this in TRE, TOC?

In Africa, Airlines, Commodities, Temasek on 26/11/2013 at 5:54 am

Changi Airport Group: Winner’s curse?

The Aeroportos do Futuro group led by Odebrecht SA, and including Singapore airport operator Changi Airport Group, offered 19 billion reais (US$8.3 billion) and won the right to run Galeao airport in Rio de Janeiro, which will host tourists for the soccer World Cup next year and the 2016 Olympic Games, for 25 years. The consortium offered nearly four times the minimum bid for the right to operate Rio’s Galeão airport for the next 25 years.

We will only know the consortium overpaid if we know the next highest bid. Will let you know if this info is made public in Brazil )))

Last chance to buy Olam?

More bull points to add to this:

— When Olam released its quarterly results in early November, it showed it  had generated positive free cash flow – the first time in four years for a seasonally weak quarter.

Its executive director of finance and business development A Shekhar told analysts and reporters: “We’re very pleased that we’re striking the right notes on both objectives of profit growth as well as free cash-flow generation.”

— Ang mohs are still sceptical about the parts of the stock’s biz model.

— But they bulls on Africa and Olam got an edge there. Africa is now seen a destination mkt, not juz an exporter of commodities i.e. origination mkt:

The commodities houses are attracted to the African destination business for three reasons. First, demand is rising fast, in many cases at double-digit annual rates. Second, many African governments subsidise basic commodities such as petrol and wheat, in effect guaranteeing a return to the traders. Third, most African countries lack the infrastructure needed to import raw materials, from silos for storing wheat and rice to terminals for unloading petrol. The commodities houses say that, as they build this infrastructure, they will be able to secure a market and benefit from years of rising demand. (FT report on Africa dated 10 November 2013)

Even Chris Balding flies SIA

Would the Temasek model help improve the efficiency of China’s state-owned enterprises? Only one (Singapore Airlines) or possibly two (DBS bank) of Temasek’s GLCs have established themselves as international brands, according to critics such as Chris Balding of Peking University*. SingTel has made successful foreign acquisitions, but other GLCs have fared less well. STATS ChipPAC, a semiconductor firm, lost money in the second quarter of this year, as a result of the costs of closing a factory in Malaysia.

The few academic studies of Singapore’s GLCs are more encouraging, however. A 2004 article by Carlos Ramirez of George Mason University and Ling Hui Tan of the IMF showed that the country’s GLCs enjoyed a higher market value, relative to the book value of their assets, than comparable private firms. They also generated a higher return on assets, on average.

In judging the performance of Temasek’s GLCs, the counterfactual is important. They may not be as obviously successful as private titans from the region such as Samsung or LG. But they are not nearly as bad as most SOEs, including China’s. The enthusiasm for reform of SOEs in China reflects their deteriorating returns and accumulating debt. According to M.K. Tang of Goldman Sachs, their return on assets was 6.5 percentage points below that of other Chinese firms in 2012 and their shares trade at a growing discount. Even Mr Balding, meanwhile, is happy to fly Singapore Airlines.

http://www.economist.com/news/finance-and-economics/21590562-chinas-rulers-look-singapore-tips-portfolio-management-soe-glc

*Cock Balding forgets Keppel and SembCorp in rigbuilding. More on these two cos later this week.

Temasek’s right on ICBC, BoC & CCB

In Banks, China, Temasek on 07/11/2013 at 4:52 am

I’ve blogged before that Temasek loves China banks while ang mohs were running away.

Well since late June, Chinese bank shares have been on a roll, example  ICBC (where Temasek had been picking up shares this yr) is up more than 22%. Recent Chinese economic data has got investors buying the banks again, ang mohs included. So much so that some smaller Chinese banks are planning IPOs in HK.

Anyway,Jack, the usual suspects, and the readers of TRE, TOC and TRS needn’t yet bang their [ ] in frustration. Firstly, Temasek can never ever exit these investments given that S’pore wants to be China’s friend. Temasek got big chunks of BoC and CCB at a “special” price.. It can only play around the margins, reducing its cost of these investments.

Then are there two more reasons why we should be worried about Temasek’s punt:-

The biggest threat to Chinese banks’ cozy oligopoly … Online groups Alibaba and Tencent are making incursions into the country’s financial services market, providing an alternative to the capped deposit rates and sluggish service offered by the country’s big lenders. The disruptors are taking on risks, and savers should be glad. http://blogs.reuters.com/breakingviews/2013/10/10/tech-disruptors-could-save-chinas-savers/

Alibaba, the e-commerce group that just bought a 51 percent stake in asset manager Tianhong for $193 million, is the banks’ main foe. By July it had made over $16 billion in short-term loans to companies who sell goods on its sites. Its real-time records of borrowers’ cashflows and counterparties aid lending decisions.

Banks’ deposits are also under threat. WeChat, the mobile chat app that clocked up over 300 million users within two years of being launched by gaming group Tencent, is working on distributing wealth products via smartphones, and offering payment for fund managers, according to Chinese media. Alibaba lets users reinvest surplus balances in their online payment accounts into money market funds. That gives savers a better return than the 3 percent capped rate they get on bank deposits.

Tech companies’ desire to disrupt the financial services sector is understandable. China’s big banks make returns on equity in excess of 20 percent.

Add to that, an attempt to shake up the country’s slow-moving financial industry and create more investment opportunities for the private sector, Chinese regulators have invited companies from across the spectrum to apply for banking licences.
And here’s the latest on bad debt write-offs (something I had talked about) http://www.bloomberg.com/news/2013-10-22/biggest-china-banks-triple-debt-write-offs-to-brace-for-defaults.html.
So Jack, etc can relax. Time enough for their curses on Ho Ching to take effect. I hope they remember that returns from the reserves are used to make life more comfortable for ourselves.

Time to chk out Olam

In Commodities, Temasek on 05/11/2013 at 4:30 am

When Muddy Waters ends up saying: “My view is that if Temasek decides tomorrow that it wanted out of this investment, it would be game over within months for them, without Temasek’s backstop,” its research director Carson Block told BT late  last week.(http://www.businesstimes.com.sg/premium/top-stories/muddy-waters-game-over-olam-if-temasek-pulls-out-20131101), its time to think it’s repenting its decision, a yr ago, to short Olam.

It’s stating the obvious. Any highly leveraged smallish stock where Temasek  exits from being a major shareholder would suffer. Temasek 1, MW 0.

Temasek has also since then progressively increased its ownership of Olam, from an initial 16.3 per cent before the Muddy Waters attack to 24.07 per cent now. Temasek 2, MW 0

In Mr Block’s view, Temasek had stepped in because of the wider implications that an Olam collapse would have posed to the commodity-trading industry in Singapore.

“If Olam had failed, what would the banks have done with the other commodity houses that are borrowing in Singapore?” he said. “It’s reasonable to assume that if the banks had to write off losses to Olam, you could have a real funding freeze for the commodity trading industry in Singapore.”

This is again stating the obvious. Temasek 3, MW 0

Funny, he didn’t bitch that BT continues to act as a chher leader for Olam. (http://www.cpf.gov.sg/imsavvy/infohub_article.asp?readid={904134059-19528-1412927508}) Temasek 4, MW 0

Maybe the narrative that Olam is changing doesn’t fit his bearish thesis. Olam is building a packaged foods business. In countries such as Nigeria, Ghana and Mali,, where it now generates sales of US$350 million, and aims to be the Unilever or Nestle of Africa. Might be interesting. Have to chk out waz this as % of total revenue and net profits. Sadly the article doesn’t give this which makes me suspicious that it’s a tiny share. Still will chk, and anyway Africa is a hot market. Temasek 5, MW 0

Final bull point, Olam did stop doing some things that Muddy waters was rightly bitching about. It shows mgt is pragmatic and flexible (Temasek 6, MW 0) , unlike the PAP govt on the FT policy (Remember the White Paper?).

Interestingly, Olam is one of the cos having an open day: a great idea.

MORE listed companies with large numbers of retail shareholders are setting aside time for the management to meet investors.

In a new trend, these companies are holding a “retail investor day” as well as the mandatory annual general meeting (AGM).

Usually, retail investors get to meet and question senior management only at the AGM.

Companies which have already held “investor day” events include Olam International, Aims AMP Capital Industrial real estate investment trust and bourse operator, the Singapore Exchange (SGX).

http://www.cpf.gov.sg/imsavvy/infohub_article.asp?readid={904134059-19479-584331750}

Oh and from the first BT report, it seems Muddy is still shorting Olam, Temasek 7, MW 0.

Temasek’s Fab 5 S’pore blue chips

In Financial competency, Temasek on 03/10/2013 at 5:11 am

Regolar readers will know this blog’s hostile to ST esp in its personal investment coverage.And usually is critical of Temasek.

Here’s an exception: If you owned one or more of these blue chips, you would be really ungrateful not to vote for PM

http://www.cpf.gov.sg/imsavvy/infohub_article.asp?readid={435478142-19236-1456515192}

Data from SGX My Gateway and Bloomberg showed aircraft engineering firm SIA Engineering Company topping the list, with a total return of 164 per cent over the five years to Sept 13, the cut-off date for this exercise. This includes price increases and cash dividends paid out, and works out to a compounded 21 per cent a year.

Telecommunications firm StarHub, engineering firm Singapore Technologies Engineering and rig builders Keppel Corporation and Sembcorp Marine round up the rest of the top five.

One key thread of these firms is that they are all part-owned by Temasek, which probably adds to the confidence of investors.

They are all also known for being solid with their dividend payments … Of course the share prices reflect that fact i.e. that there are better yields in the market albeit with greater risk.

Disclosure: got Keppel for yonks, and odd lot of SIAEC.

Our world class Chinese banks need US$50-500bn more in capital

In Banks, China, Temasek on 12/09/2013 at 4:56 am

This blog has been pointing out why ang mohs don’t like Chinese banks, while Temasek loves them.

This short video shows the strengths of Chinese banks in size and income from interest (Big 4 in global top 10). The latter must surely be a consideration in why Temasek invests in three of them.

http://www.economist.com/blogs/graphicdetail/2013/09/daily-chart-1

Now back to the worrying analysis:

— With bad loans and competition rising, China’s largest banks face tougher times ahead. ChinaScope Financial, a research firm partly owned by Moody’s, a ratings agency, has analysed how declining net interest margins will affect China’s banks. It estimates that the sector will need an injection of $50 billion-100 billion over the next two years just to keep its capital ratios at today’s level. The managements of the Big Four realise this, and have won approval from their boards to raise over $40 billion in fresh capital over the next two years. But Andrew Sheng of the Fung Global Institute, a think-tank, reckons the sector will need to raise even more later: up to $300 billion over the next five years.

http://www.economist.com/news/finance-and-economics/21584331-four-worlds-biggest-lenders-must-face-some-nasty-truths-giant-reality-check

— China’s bad debts could blow a $500 billion hole in bank balance sheets. That’s roughly how much extra equity the eleven biggest lenders might need if 10 percent of their loans went sour, according to a Breakingviews calculator.

http://blogs.reuters.com/breakingviews/2013/09/04/chinas-bad-debt-could-leave-500-bln-equity-hole/

Temasek’s Chinese banks pay great dividends but there’s a catch

In Banks, Financial competency, Temasek on 20/08/2013 at 5:01 am

ICBC pays 6.1%, while CCB and BoC pay 6%. If it had AgBank, it would get 6.4%.

Contrast this with the dividend yield it gets from

— DBS: 4.4% (UOB’s yield is 2.9% and OCBC’s is 3.2%)

— Bank Danamon: 2.4%

— StanChart: 3.5% (BTW,  earlier this month the bank said  that it was no longer targeting double digit revenue growth this year. Year-on-year revenue growth in the first six months was less than 5% for the first time in 10 yrs.)

But Chinese bank yields are so gd largely because Chinese banks are not popular with ang mohs: one-tenth share price falls this yr helped produce these yields. https://atans1.wordpress.com/2013/07/02/time-to-worry-about-temaseks-strategy-on-chinese-banks/

And there are gd reasons to be fearful. One is concern that there could be more bad debts building up in the system as the economy slows/

Another: ChinaScope Financial, a research firm, has analysed how increased competition and declining net interest margins will affect banks operating in China. The boffins conclude that the smallest local outfits, known as city commercial banks, and the middling private-sector banks will be hit hardest, but that returns on equity at the big five state banks will also be squeezed (see chart). They think the industry will need $50 billion-100 billion in extra capital over the next two years to keep its capital ratios stable.

The bigger worry for China’s state banks is the signal sent by the PBOC’s move. The central bank has affirmed its commitment to reform. If those reforms include the liberalisation of deposit rates, then something far more serious than a minor profit squeeze will befall China’s banks. Guaranteed profitability would end; banks would have to compete for customers; and risk management would suddenly matter. In short, Chinese bankers would have to start working for a living.

http://www.economist.com/news/finance-and-economics/21582290-chinas-central-bank-has-liberalised-lending-rates-does-it-matter-small-step

And two of China’s four “bad’ banks (they bot portfolios of dud loans from Chinese banks, the last time the Chinese cleaned up their banks in the late 1990s and early noughtie), are planning to raise capital via IPOs. They have impressive returns. But maybe China is preparing for the day it has to recapitalise the banks again. In such a case, the UK and US experience is that the other shareholders get diluted, and can lose serious money. Think UBS and RBS.

Even if there is no recapitalisation, there are likely to be rights issues, something that ang moh fund mgrs don’t like.

But to be fair, this big chart shows a possible reason why Temask is optimistic. Despite loan growth, bad loans are falling. But the economy was growing rapidly. And sceptics point out that the numbers may be flakey. In the 1990s, the real bad loan position was 20%, not the lowish figures reported at the time. Investors forget this ’cause banks were 100% govt owned.

Related (sort of) link: http://wikileaks.org/cable/2009/06/09SINGAPORE588.html

Graphics from FT.

DBS, Temasek, Indonesia all lose

In Indonesia, Temasek on 06/08/2013 at 5:02 am

Maybe DBS should blame VivianB (and the PM) for taking a hard stand on the haze issue, even though this blog supports their stance because the Indon govt is naturally devious on this and other issues.

Seriously, DBS, Temasek and Indonesia all lose following DBS’ decision to allow its agreement to buy Temasek’s stake in Bank Danamon to lapse after the Indons only allowed it to buy up to 40% of Bank Danamon. It wanted DBS’s entire 67% stake and more: see Backgrounder at end of article for details.

Why DBS loses

Piyush Gupta, pulling his [US]$6.5 billion bid for PT Bank Danamon Indonesia, said his ambitions in Southeast Asia’s largest economy may be set back by about five years.

The lender had sought a controlling stake in Danamon as part of a strategy to expand in markets outside Singapore and Hong Kong, which jointly accounted for 83 percent of its profit in 2012. Average net interest margins for banks in its home market are 1.82 percent, according to data compiled by Bloomberg based on the latest company filings, lagging behind lenders in the rest of Southeast Asia. In Hong Kong, the measure is even lower at 1.66 percent, the data show. [Note that DBS gets 80% of its profits from S’pore and HK.]

In contrast, Indonesian lenders are the most profitable in the world’s 20 biggest economies, data compiled by Bloomberg show. Banks with a market value of at least $5 billion boast an average net interest margin of 6.6 percent, the data show.

DBS’s net interest margin shrank to 1.62 percent last quarter from 1.72 percent a year earlier, today’s earnings report showed. That’s the 15th straight year-on-year decline.

http://www.bloomberg.com/news/2013-07-31/dbs-drops-6-5-billion-danamon-bid-after-failing-to-win-control.html

Note too that DBS doesn’t have much of an Asean presence outside S’pore. It has no retail network in peninsula Malaysia, unlike UOB and OCBC: a failure of its botched attempt to takeover OUB in the early noughties. And unlike Maybank and CIMB, its M’sian rivals, it has only “peanuts” in Indonesia. They, Maybank, in particular, have thriving and biggish S’pore operations.

“DBS missed out on a value-creation opportunity,” Kevin Kwek, an analyst at Sanford C. Bernstein & Co. … The bank “will have to build up a presence in Indonesia the longer and harder way.”

“Indonesia was supposed to give them a leg up in terms of growth,” said Julian Chua … at Nomura … “There may not be that many willing sellers of such a sizable bank.”

If you are wondering why the shares are up then, investors think DBS may use the $ to return some capital. Besides, the issue of shares to Temasek would have been dilutive. And Indonesia’s economy is slowing.

FTs can be blamed for these historical failings, though Gupta and his deputy are exceptions to the rule that in DBS the “T” stands for “Trash”, not “Talent”. They have stabilised DBS’ operationally. And are trying to repair the damage done by DBS’ earlier FT inspired strategy of buying non-controlling stakes in regional banks.

Why Temasek loses

Its involvement as a shareholder in both banks helped spark an anti-Singapore political backlash in Indonesia. The value of its investment has also been reduced by new Indonesian restrictions which limit single bank shareholders to a 40 percent stake. That makes Danamon a less attractive target because Basel capital rules make it expensive for banks to hold minority stakes in other lenders.

However, Temasek can also take comfort. It is under no immediate pressure to sell. And though Danamon shares fell by more than 13 percent on Aug. 1, Temasek’s 67 percent shareholding is still a highly successful investment.

The Japanese banks are seen as interested in the 40% stake that it can sell. They have been buying minority stakes in Indonesia and the region https://atans1.wordpress.com/2013/07/06/asean-round-up-30/, https://atans1.wordpress.com/2012/12/29/jappo-banks-step-up-presence-in-asean-region/

Why Indonesia loses

lost http://blogs.reuters.com/breakingviews/2013/08/01/indonesia-biggest-loser-from-bank-merger-flop/

Here’s an alternate view that DBS and S’pore lost more than Indonesia: http://www.themalaymailonline.com/what-you-think/article/singapore-loses-much-more-than-indonesia-in-dbs-decision-vincent-lingga. I’m sure TRE posters and Balding would agree with this view.

Backgrounder from Bloomberg

DBS had proposed acquiring the 67.4 percent stake in Danamon held by Fullerton Financial by allowing it to swap its Danamon holdings into DBS shares. The exchange was to be at a price of 7,000 rupiah for each Danamon share and called for DBS to issue 439 million new shares to the Temasek unit at S$14.07 apiece, increasing the stake held in DBS by Singapore’s state-owned investment company to 40.4 percent from 29.5 percent.

Following that transaction, DBS would have made a tender offer for any remaining Danamon stock at 7,000 rupiah a share, taking its holding in the Indonesian bank to 99 percent.

Norway’s SWF: transparency & performance not exclusive

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

From FT

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

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

Update two hrs after publication:

Unlike Temasek, it ain’t big on Chinese banks

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

– 2% of Bank of China

– 8% of China Construction Bank

8% of Industrial & Commercial Bank of China,

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

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.

Temask is halal, sort of

In Humour, Temasek on 04/07/2013 at 4:43 am
Jeffrey Fang, associate director of corporate affairs for Temasek, in response to a query from BT in early June*, said: “As a matter of policy, we do not invest directly in casinos or tobacco companies at the Temasek level – this is a deemed interest due to the aggregation of the direct or indirect investment stakes held by the Temasek subsidiaries.”
But a few days later, it was reported in FT that Temasek has a almost 3% stake in Shuanghui International, the Chinese owned entity that is bidding for Smithfields, the world’s biggest pork producer, based in the US.
So two-thirds halal?
—-

* Context Fullerton Fund Management Company (FFMC), a subsidiary of Temasek Holdings, has bought a 5.02 per cent stake in Melco Crown Philippines Resorts Corp.

FFMC has acquired 222.2 million Melco shares, according to the company, which is listed on the Philippine Stock Exchange.

Melco is the Philippine unit of Nasdaq-listed Melco Crown Entertainment, which is backed by Lawrence Ho, a relative of Macau casino mogul Stanley Ho.

Time to worry about Temasek’s strategy on Chinese banks

In Banks, China, Temasek on 02/07/2013 at 5:07 am

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)

S’poreans have to keep a beady eye on developments in the Chinese economy particularly in the financial sector.

Well things don’t look that rosy:

There is of course a second and much more disturbing possible implication of spiking lending rates in China – which is that the slowdown in credit creation will lead to tumbling asset prices, widespread bankruptcies and the crippling of the banking and wider financial system …

According to a recent and influential report by Fitch, outstanding loans by Chinese banks and shadow financial institutions were equivalent to 200% of GDP at the end of 2012, up from around 125% of GDP in 2008.

 As quantum, domestic business and household debt at two times GDP is high – pretty similar, for example, to a debt burden on the UK private sector which has hobbled our [UK] economy.

 But it is the stunning and unsustainably rapid rate of growth in Chinese credit creation, and who has borrowed the money, that are the main sources of concern.

 Unless China is re-writing financial history, much of that money will have been lent without due care to businesses and individuals, and many of them will never be able to repay much of it.

 As and when that is too conspicuous to ignore, banks and financial institutions will go bust – unless bailed out by central bank and government. http://www.bbc.co.uk/news/business-23000323*

Well in the case of the UK, two major banks were effectively nationalised, and the existing shareholders were left with “peanuts”. And UBS and Citi received injections of cash from their central banks in exchange for securities, exchanges that diluted their other shareholders, including GIC.

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

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

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

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

— Estimate of GIC’s loss on UBS:

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

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

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

Hopefully Superwoman Lina Chiam will raise the issue of Temasek’s strategy doubling up on Chinese banks in parly so that the finance minister’s rebuttal of her concern, will be a matter of public record,  come the next GE.

*And not only ang mohs are worried about China and its financial system: http://blogs.reuters.com/breakingviews/2013/06/28/review-tales-from-chinas-wild-lending-frontier/

Govt does listen, at least PM’s wife does

In Temasek on 11/06/2013 at 5:53 am

New DBS-Fullerton fund targets small investors

SMALL investors with just $1,000 now have a chance to dabble in an investment fund linked to Temasek Holdings.

Temasek’s Fullerton Fund Management has tied up with DBS Bank to launch the new investment fund with a focus on Asian equities and fixed-income securities. ST

http://www.cpf.gov.sg/imsavvy/infohub_article.asp?readid={309678777-17694-9216991662}

A few yrs back, netizens were screaming their heads off, cursing Temasek when it said it (via Fullerton) was planning to move into fund mgt: for foreigners. It was pointed out that this was unfair to S’poreans especially smaller investors who were getting “peanuts” 2.5% and 4% on their CPF monies.And that Temask’s staff were paid (indirectly) by the tax-payer but foreigners were getting the benefit of their expertise.

Funnily, these same netizens were bitching that Temasek was a lousy investor of S’pore’s money.

Anyway this new fund shows the govt (or at least Temask) does listen. LOL. Not that netizens care, ’cause thry’ve moved on to the next bitch LOL. Taz ’cause the internet is like water: always moving on.

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