This
abstract is a good response to MM LKY views that are boasted to an
overseas audience that do not know of the ongoing events in
Singapore.
Lame excuses given by Tharman on
Temasek’s loss
June 5, 2009
By Jeremy Koh and Eugene Yeo
Embattled Temasek Holdings was dealt another blow this week
following the revelation that it may suffer a loss of between
500 million pounds (S$1.18 billion) and 600 million pounds on the
sale of its stake in British bank Barclays, which was said to be
have been completed in December and January. (read
article here)
The report first surfaced in Reuters which was in turn published in
the Straits Times. Temasek had declined comments on the sale.
As expected, the Straits Times tried to play down the loss by
quoting Finance Minister Tharman’s speech in Parliament a week ago
in defence of Temasek’s ‘track’ record.
Mr Tharman said Temasek’s portfolio grew $56 billion from March
2003 to November last year even after taking recent sharp declines
into account. It averaged returns of slightly over 15 per cent a
year.
It appears that Mr Tharman is not aware of the two “golden rules”
of investment by U.S. investment guru Warren Buffett:
1. Do not lose money.
2. Remember rule 1.
The often cited reasons, or rather, excuses for Temasek’s ill-timed
investment decisions are:
1. Temasek’s ‘track record’ in the past where it had made ‘large
investment gains’.
2. Temasek is a “long term” investor and does not make its
decisions based on short term market changes.
3. Temasek is now tweaking of its long-term investment strategy to
focus more on Asia and emerging markets such as Brazil and
Russia.
Gains made in the past when the market is on a bull
run does not exonerate one from incurring catastrophic losses
now. If any fund manager used that as an excuse for the fund’s poor
performance, he or she will be sacked a long time ago.
Mr Tharman claimed that Temasek’s portfolio had grown by
$56 million between 2003 and 2007 before losing
$58 million dollars last year due to the global
economic downturn, which is beyond its “control”.
However, a well managed fund can still generate healthy returns in
bad times as shown by the Chinese and Abu Dhabi sovereign wealth
funds.
Morever, unlike private investment funds, Temasek has the backing
of the Singapore government which provides it with a ready source
of “cheap” funds and assets.
Temasek been tasked with the privatization of government-related
companies, like Singtel and SMRT. Government-linked companies
(GLCs) identified for privatization or divestment were typically
transferred to Temasek.
In 2001, Temasek received in its arms Singapore Power together with
two electricity generators - PowerSeraya and Power Senoko. Over a
period of 10 months in 2008, Temasek sold all three Singapore power
generation companies under its charge for a hefty profit. (read
full article here)
It doesn’t take a genius to know that power supply, telco and
transport companies are extremely profitable businesses especially
in Singapore where they enjoy a virtual monopoly with few
rivals.
Unless Mr Tharman revealed the price paid by Temasek for these
assets, we will never know how much of “returns” gained by Temasek
come from its external investments instead of sale of
government-related companies.
The timing of Temasek’s sale of both its stakes in Bank of America
and Barclays at the bottom of the market less than 2 years
after their acquisitions is perculiar given that they are
“long term” investments.
Shouldn’t Temasek be holding on to its investment for a 10, 20 or
even 30 year period if they are indeed made for strategic purposes
with a long term outlook?
The reason that the sale is made in order to “focus” more on Asia
and emerging markets is baffling as Temasek should have enough cash
in its kitty to make new investments without selling off BOA and
Barclays which caused them to suffer a loss of a few billion
dollars.
Temasek’s latest investment in the China Construction Bank cost
US$600 million dollars which is “small change” compared to the
several billion of dollars it still has at its disposal. It does
not need to sell off BOA and Barclays in order to generate funds
for its new investments.
Let’s hear what Jeremy Warner of the UK Daily “The
Independent” has to say:
“Temasek, the Singapore sovereign wealth fund, seems to have
lost the plot. Unlike Sheikh Mansour bin Zayed al
Nahyan of Abu Dhabi, who has just made a killing from his
investment in Barclays, Temasek apparently chose the bottom of the
market earlier this year to offload its stake in Barclays, thereby
clocking up a loss on the investment of £500m. Temasek’s loss on a
similar investment in Bank of America was an
evenmore jaw-dropping
$3bn. If they haven’t been already, someone,
somewhere, is going to get fired.”
[Source: The
Independent]
I can’t agree more. Temasek, Tharman and the PAP have lost the plot
altogether! The 500 million pounds or $816 million dollars lost can
be used to fund a pension, retirement or welfare fund for needy,
retrenched and destitute Singaporeans for a few generations.
