China’s Sovereign Wealth Fund earns USD $10 billion dollars by ‘doing nothing’
By Eugene Yeo
In spite of the disastrous mistake made by Temasek and GIC in its risky forays into the finance sector which caused us to lose billions of dollars, the PAP spin doctors and apologists continue to insist that they have not “done so badly” compared to other SWFs like Kuwait and Abu Dhabi and that it is “inevitable” that the funds are performing badly in the face of the global economic crisis.
Even our highly paid Prime Minister appeared to be taken in by the spins of his own propaganda mouthpiece. Speaking at the Singapore Tripartism Forum last Sunday, he said:
“Some years it will go down, some years it will go up more. But on average it’s not bad. And we have to take a long-term view because this is not money for now, this is money for many years ahead. If you look at a long-term basis, on the overall on the way the government has managed the money, we haven’t done badly“.
Only fools will be taken in by such outrageous hogwash ! The unsavory truth is – Temasek and GIC’s performance is nothing short of catastrophe ! The extent of our losses beg the question whether the government had exercised due caution and diligence in the management of the funds.
It is a myth that it is unavoidable that our SWFs have lost monies. In fact, there are other SWFs which are making money in such troubled times !
Since the regime has always been quick to curry favors with China, why did they hide the performance of China’s SWF from Singaporeans ?? There were no reports on the performance of China’s SWF in both the English and Chinese dailies. Shouldn’t we deserve to know how Temasek and GIC perform in comparison to the SWFs of other Asia countries ?
“China Investment Corp (CIC), the country’s $200 billion sovereign wealth fund, made a profit of about $10 billion last year as it benefited from staying largely in cash and avoiding new investments in Western banks, a source close to the fund told Reuters on Tuesday.
“Combining all the investments together, CIC is still enjoying a positive profit of slightly less than 5 percent, which is better than many other foreign wealth funds,” said the source, who declined to be identified as he was not authorised to speak to the media.
CIC’s profitability stands in sharp contrast to the recent results of some other sovereign wealth funds (SWFs).
The assets of Singapore state investor Temasek Holdings [TEM.UL] shrank 31 percent to S$127 billion ($84 billion) in the eight months to November, due in part to poorly timed investments in Barclays and Merrill Lynch.” (Read full article here)
As the China example has shown us, it is possible to make considerable profits by simply “doing nothing” with the cash instead of throwing them at risky investments.
Furthermore, it is not true that “nobody could have foreseen the financial crisis.” Renowned investors George Soros, Warren Buffett and Jim Rogers had warned about the impending collapse of the United States banking sector way before the crisis stuck.
As early as March 2008, investment guru Jim Rogers had expressed his belief that US bank stocks could fall further and predicts that Singapore’s state investors will lose money on their multi-billion dollar investments in Citigroup and Merrill Lynch. ‘I’m shorting investment banks on Wall Street,’ the long-time commodities bull told reporters in a media interview.
‘It grieves me to see what Singapore is doing. They are going to lose money,’ he added, referring to investments by Government of Singapore Investment Corp and Temasek in Citigroup, Switzerland’s UBS and Merrill Lynch.
Why didn’t Temasek and GIC take note of this warning then and still go ahead and plough in more money into Citigroup and Merrill Lynch subsequently ?
How much money have we been paying for the “top talents” at Temasek and GIC to manage our funds during the “good” years ? Besides the ministerial pay he is getting, how much salary is MM Lee drawing annually as GIC Chairman ? Are these salaries justified ?
Since our leaders have always pride themselves as banking executives in Wall Streets who deserve to be paid at market rates, shouldn’t they follow the practice in the private sector too and resign to take responsibility for the mistakes ?
When they demand us to pay them out of the world salaries, shouldn’t we expect them to deliver “out of the world” performance even in an economic downturn like China’s Sovereign Wealth Fund ? There is absolutely no excuse for their dismal performance. Temasek and GIC are expected to generate returns even during troubling times instead of losing a bulk of our reserves !
Singapore have imported so many China nationals to our shores over the years – Chinese students, workers, prostitutes and Peidu mamas. Maybe we should bring the CIC fund managers which probably cost less than our “first world talents” over to teach our SWFs how to grow their funds for the “long term”.
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tan on Fri, 27th Feb 2009 3:04 am
Here’s how some creative reporting was done to lesses the looks of the loss to 31%
1. Loss as of 31st November 08 rather than Feb 09 when the 31% loss was reported in the press followed by Ho Ching’s resignation.
Price then in Nov 2008 vs present price. Use Google Finance. you can see all the prices
Citi : $8 vs $2 now
Barclays : 169 vs 113 now
BOA : $16 vs 5 now
UBS 12 vs 10 now
standchart: 843 vs 680 now
the list goes one…….for both Temasek and GIC
2. Temasek factored in the sale of power plants which had huge profits as cost (asset on balance sheet) was low ie 30yrs ago vs sales price in 2009 so showed huge profits. he says the loss of the power plants were really a waste as the pricing could have been better but desperate & made a turnaround when announced they would not sell. This one is really a betrayal cos all our power gen cos are now foreign owned and govt will have no control over pricing anymore. The people will be the one to suffer which is what happen in the last quarter when electricity just shot up 25% eventhough oil was collapsing.
3. Other assets in the balance sheets are not marked to market unlike banks who have to do them quarterly hence many assets are overpriced now relative to current pricing.
The losses are at least 50% if not more. You may want to check out the Temasek report.
basically…….there is very little transparency and She has no regrets!!!!!!
REMF on Fri, 27th Feb 2009 4:49 am
Any investigative journalism to grill which team of analysts at GIC and TH recommended “buy” in UBS, Barclay, Merrill Lynch and CitiCorp?
Is the “buy” order thru’ all those Western “old boy network” – Western guanxi – that took GIC and TH for a ride acoompanied by much guttural laughters and champagne toasting in boardrooms all over the West?
Certainly, heads must roll, all S$58-billion and S$50-billion worth of it.
tan on Fri, 27th Feb 2009 11:01 am
You are right on! old boys network which most are now out or on their way out. That’s the problem, you see….Ho Ching, top 10 most powerful woman on the planet so these banking titans. Of course, no longer in 2009. My friend mocked her describing to me how she was like in Temasek, how she had favourites (those who could do no wrong yet incompetent) and so many within Temasek are simply mocking her…of course in front of the Empress. Yes Mdm…Yes Mdm.. you’re the woman.. but behind.. laugh at her idiotic decision making and logic behind them. Basically, she’s the joke of the investment community.
Here are some of my thoughts:
1. Why the hell did Temasek pursue a growth investment strategy ie High beta stocks when our reserves, as precious as it is, should dictate we pursue a low Beta, value investment strategy. ie, all our people, Ho Ching included (by the way, an engineer by training: what the hell does she know about investment) should be shipped to Warren Buffet for Training. Why Warren Buffet should have been invited to sit on the board of Temasek and GIC. Ironically, MM mocked Warren saying he has shareholders to account to yearly hence could not pursue the kind of investments Temasek would go into. Look who has the last laugh. Warren’s $5b investment in Goldman sacs is down a mere 10% from his entry price (plus it’s pref shares). Goldman has not raised more funds hence protecting existing shareholders from dilution. Contray to what MM says…..Temasek’s investments in the banks are screwed….dilution all around significantly and the death knell is when the US Govt takes 20-40% stakes in the banks. Our investments are really LONG LONG TERM investments.
2. Why the hell is Dhanabalan chairman of Temasek..another non-financial trained. Shouldn’t Richard Hu or Tony Tan be??? Tony Tan though made bad investments decisions, the structure of the investments protect the reserves from the downside, and in a worse case scenerio, we earn just the paltry dividend/interest from the preference shares strcuture. Nothing really to shout about but the capital is preserved. Tony Tan’s a smart man. This is where I don’t get it. How the hell could Ho Ching take such reckless risks when Tony Tan is taking a more prudent approach structuring deals like Warren Buffet’s deal with Goldman. off couse, GIC should have waited longer and using the same structures, GIC would have huge upside 5-10yrs down the road.
3. In conclusion, years of savings(reserves) and growth of our Singapore assets in the portfolio have been depleted just by some of these crap investments.
4. To say that Ho Ching simply lost back on some of the profits mades in the last 4yrs is also untrue. Many of the divestments were made before her time like the Power generating hence it’s easy to push the button to sell and book the profits. Her measurement should be purely on the deals she made during her tenue in Temasek. (it’s a dismal record) contray to what is reported. What I’m very pissed of including my friend is the new guy might come under severe pressure and continue to sell assets held for a long time to limit the losses. I would rather see Temasek OWN UP. ADMIST THEY F UP and write off the bloody investment like what Ron Sim did with OSIM, write off the their 90m balance in investment in the US foray to stop future hits on their P&L…which incidently… another mess up by Temasek there. THink they put in $150m in that deal.
5. I used to be an ardent supported of the PAP. But this time round, I’m going to put a NO VOTE in the ballot to send a message (eventhough Khaw Boon Wah is my MP, met him, spoke to him and I like him. he’s a good guy…one of the few who dare to say I’m sorry, let’s fix it) The rest with the exception of Vivian and George Yeo..are becoming high and mighty in the ivory towers and in this time of crisis…their true colours are beginning to show. Raymond Lim.
I just feel sick that now all the coverings, BS in the press is starting in preparation of a quick General Elections.
By the way, PM Lee was also the Finance Minister during the last 4yrs before Tharman tooked over so technically, the Wife reported to him. Temasek reports to MOF which is why the equally incompetent Lim Hwee Hua reported on behalf of Temasek.
6. PM made the biggest mistake of his career as PM, allow the appointment of his wife as CEO Temasek and wiped about billions of our reserves that his father MM and team build up so damn painstakingly over the decades.
7. There’s no accountability and if singaporeans let it passed this time round ie the Ho Ching saga, by the time MM goes, I don’t think Singapore can survive well in another generation.
THERE MUST BE ACCOUNTABILITY!
8. To rub salt into the wound, “I’ve no regrets”. Seriously, what kind of F up attitude it that…oh ya, she’s the Wife of the Prime Minister.
A very disappointed PAP Supporter.
tan on Fri, 27th Feb 2009 11:11 am
By the way….the best part is quite a bit of information is public and can be found so I hope the opposition get a group of financial guys to put together a piece and mail it out to the HDB HEATLANDERs and in the demand for transparency.
The public MUST KNOW before the pending elections and hahahaha. Temasek can’t sue for defamation cos it’s all true.hahahahaha.. U’re be amazed there has been no lawsuit lodged on investement analyst reporting on the Temasek screw ups. hahahaha so they must be true right?
The Pariah on Fri, 27th Feb 2009 11:22 am
Singapore ministerial pay is pegged to the top 8 income earners of 6 professions – BANKERS are amongst the 6 professions.
Now that Obama is capping American bankers’ pay and a lot of the Western banks are bleeding losses, maybe the top 8 bankers will be eliminated from the ministerial benchmark, you think???
mike on Fri, 27th Feb 2009 2:15 pm
tan on Fri feb 2009 11.01am,,
you’re damn right and totally agree what you’ve just wrote. like you being MP Khaw’s zone whom i was half hearted to vote but i did somehow. but this time round, you bet what i would vote!!!!!!!!!!!!!!
Rinee on Fri, 27th Feb 2009 9:53 pm
Any Good Fengshui Masters around?
tan on Fri, 27th Feb 2009 11:43 pm
It’s confirmed!!! GIC’s investment in Citi is impaired. US Govt just converted it’s $40b preference shares into ordinary shares for a 36% stake. Dilution to all other shareholders is massive. Citi shares dived 70c to $1.68. Shares are particularly worthless. There is pressure on the other sovereign wealth funds to convert the preference shares to ordinary shares so if GIC converts, we can kiss our investment goodbye. They better not convert no matter what. As long as GIC does not convert, GIC can take back the principal at the end of the preference shares period and still collect the 7% dividend.
Exposer on Sat, 28th Feb 2009 12:17 am
Please, please
to those who used for vote for MPs or ministers who are good, bear in mind what PM says in his own words
http://nedstark.wordpress.com/2008/08/27/vote-mp-vote-pap-and-the-presumption-of-innocence/
“So when an MP is elected, it means voters are also giving the mandate to the party represented by the MP to form the government.”
Whether you like it or not, you in fact do not vote for gahmen, you are in fact voting for the party.
In other words,
MP = PAP,
so when you cast your vote, be reminded you are voting for the party not for any individual, and should you vote for PAP, you voting for price increase and price hike after election, so to speak.
If you voting for PAP, you are as good as telling that PAP is doing the right thing for citizen (albeit screwin them)…
So please, do the right thing and spread the message that you cannot vote for individual but only for party because PM Lee tell you so.
neversaydie on Sat, 28th Feb 2009 4:13 am
To tan on Fri, 27th Feb 2009 11:43 pm :
To add salt to the wound, GIC seems to intend to pay 3 dollars for shares that are worth 1++ through its preference shares that it owns.
Would you do something like that?
pay 3 dollars for something that you could have bought using 1 dollars ++.
Why would GIC do this?
Because the decision makers would take the shit if Citi fails and the monies don’t come from them.
So, they are willing to throw good monies after bad ones to ensure that citi has a better chance of surviving.
If citi survives, they have less reasons to be sacked.
if citi doesn’t survive, some one will take the shit. This is especially important if reputation is more important than monies for some people.
And as an add on, they don’t pay a single cent for these investments. US and so called future generation have to pay for it through actual losses or missing out on opportunities.
They are acting in their own self interest and in this case, their interest and our interests are no aligned.
neversaydie on Sat, 28th Feb 2009 1:33 pm
I don’t know whether any one notice if the new investment into citibank is close to the amount supposed to be spent on JCS.
If JCS is so good, why not sweeten the deal with this investment monies.
Why pay 3 dollars for something you could have gotten for 1 dollar?
don’t seem to make sense right?
tan on Sat, 28th Feb 2009 5:33 pm
My concern was the conversion would be at $24. At $3.25. OK, there is much better chance for GIC to make money in the next 5yrs. It is the existing shareholders that get really diluted down.
That scenerio of huge dilution effectivly kills their investment value as there are more shares in the common ordinary pool. That’s why it’s called dilution. TEMASEK’s Barclays, Meryll’s investment is of SUCH. HUGE DILUTION hence HUGE MASSIVE LOSSES.
Other equally screwed up investments, ABC Learning (coy had HUGE DEBTS/gearing)…yet still invest $400m & coy died several mmonths later. Shin Corp, OSIM’s joint venture US acqusition, another 150m, didn’t cash out of the China bank shares when they were super high….(Warren Buffet sold out 1st).
That’s why, compared to Tony Tan’s qualification as a BANKER, HO CHING is a DUMB, INCOMPETENT and TOTALLY UNQUALIFIED engineer(no disrespect to engineers) to play with our reserves.
Talk about Meritocracy.
Evidence ???
Look at the financial statements of Temasek,
In the last 3 yrs, 2006, 2007, 2008..two years after she was CEO, cash invested outside equlled almost $70b of which last yr was the max $32b. It is damn obvious MOF had to pump money in and Temasek probably issued Bonds too.
The Cashflow states smecks of wilfull investing at the market’s peak years of 06 and 07. A clear departure of the conservative investment style… maatch with the cashflow in the years before Ho Ching.
As I still said, she mess up and there should be serious accountability…not just “I have no regrets”…which mere mortal could say that unless she’s the wife of the Prime Minister. Sick!