What an Elaborate Way to Keep us in the Dark, Temasek
August 2nd, 2009 | 
Author: By Gangasudhan, Guest Columnist
What I have gathered is as such:
26 August 2008 – Temasek announces its performance for Financial Year (April 2007 to March 2008) and reports that its portfolio value increased 13% from S$164 billion to S$185 billion (source: Temasek Review 2008 & Temasek Holdings)
August 2008 – Annual Temasek Review defines the VaR as a ’statistical model that estimates the potential loss on a portfolio for a given confidence level … for a 12-month period at an 84% confidence level (and) is derived using a Monte Carlo simulation based on three years of price data’; and estimates the theorectical figure for 2008 to be S$40 billion – as compared to S$24 billion for 2007 (source: Temasek Review 2008 & Temasek Review 2007)
10 February 2009 – Senior Minister of State for Finance, Lim Hwee Hua reveals in parliament that Temasek’s ‘net portfolio value at 30 November 2008 was S$127 billion’, however AFP’s request for confirmation of that figure from Temasek goes unanswered (sources: Singapore Parliament & AFP)
28 May 2009 – Minister for Finance, Tharman Shanmugaratnam corroborates Lim Hwee Hua’s version by declaring in parliament that the ‘full year accounts to end March 2009 have not been audited, but the picture should not be fundamentally different from what I have described as equity markets globally showed no major change as at end March 2009 compared to end November 2008′ (source: Singapore Parliament)
29 July 2009 – CEO of Temasek, Ho Ching shares in a speech at a forum that the estimation of the VaR at S$40 billion ‘has turned out to be so, and more’ (source: Institute of Policy Studies)
So, essentially, nobody is lying about the figures – but they aren’t telling the complete truth either. The ‘magical’ S$40 billion thrown up yesterday is merely a theoretical figure derived from a (purely) statistical estimation.
My speculation is that if the value of the losses was less than the November 2008 figure of S$58 billion (S$185 bilion – S$127 billion), Temasek would have used this opportunity to trumpet this positivity. Therefore, the very fact that no actual figure was mentioned and a wholly-theoretical number was relied upon instead (when concrete figures would be available to the CEO by now) suggests that the losses might very well be GREATER than the recorded S$58 billion.
Of course, a nice capital injection from Temasek’s only shareholder, the Singapore Minsitry of Finance could mitigate that value nicely, just like it happened in 2008 – ‘(p)art of the increase in portfolio size came from a net fresh capital injection of S$10 billion from our shareholder as part of its asset allocation rebalancing’ (source: Temasek Review 2008) – which would mean the portfolio increase was actually S$164 billion to S$175billion (6.7% growth) + S$10 billion.
Well, I’m waiting for Temasek Review 2009 which should be out sometime next month to get the actual figures – and all the creative accounting it will contain. I’ll be sure to keep you all informed on what I find then but in the meanwhile, don’t make too much of the magic S$40 billion figure – focus on the S$58 billion instead as it’s closer to the truth.
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There are lies, damn lies and statistics. Then there are the accounts of Temasek and GIC…
Plus One For Ganga’s Efforts!
Perhaps Chip Goodyear found the accounting system of Temasek too complex and mind-boggling or he was kept in the dark as well.
Yes, it is likely the loss is $58B or more. Without accountability and transparency to verify our reserves, I have even more doubts. Common sense tells me not to trust people who fear the truth.
Might want to analyse
Temasek sold out of BoA and Barclays before the rally, and presumably reinvested in East Asia?
Would it have come out ahead in the switch assuming same amt was reinvested. You can use some East Asia index as proxy?
Or is the thesis “Buy high, sell low”, valid?
Thanks to ST, we now know that if Temasek had bought additional Asian bank shares, with its BOA Barclays money, it would still be behind. Better to have stuck to BOA and Barlays
Temasek’s Asian banks performance (end March – July)
CCB — 42% BoC — 50.2
NIB — (10.9)
ICICI Bank –127.9
SC — 65.7
Danamon –104.3
Hana — 68.3
I calculated that Barclay’s share price was 142% up between end Match and July, and BOA was up 128%.
Somehow the rebound of Temasek’s Asian banks shown in ST’s table pale by comparison.
Buy high, sell low.
Mark to mark accounting perhaps?