CEO Ho Ching’s exit won’t alter fortunes
of the
sovereign wealth fund in short term
Ho Ching’s resignation as CEO of Temasek
Holdings
would not cloud heavy losses of about 40 per cent at
Singapore’s sovereign wealth fund amid the global
financial market meltdown.
The Government Investment Corporation of Singapore
(GIC) is also suffering similar heavy losses.
An investment analyst in Singapore said Temasek’s
results will be released in April and he estimated
that of its US$125 billion portfolio as of March 2008,
Temasek would have lost 40 per cent, leaving it with
about US$75 billion left.
As for the Government Investment Corporation of
Singapore or GIC, the investment analyst said
it would
also lose more than a third of the value of its
investment portfolio.
“GIC started the crisis with roughly Singapore $550
billion in reserves. My estimate is that it has lost
about $190-$200 billion of that, leaving it with about
$350 billion left. This amount is equivalent to 200
per cent of Singapore’s gross domestic product,” he
added.
“So both have lost money but their performance has not
been out of line with other large funds, possibly a
bit better. These are all worst-case estimates.”
Ho, the wife of Prime Minister Lee Hsieng Loong,
announced last week that after almost seven years at
the helm of Temasek, she would step down by October
this year. She would be succeeded by Chip Goodyear, a
former CEO of BHP
Billiton Ltd, who would be the first
foreigner to run the sovereign wealth fund.
Temasek Holdings was set up by proceeds from the
privatisation of Singapore’s state-owned firms, while
GIC by international reserves of the
Monetary
Authority of Singapore. Both represent the investment
vehicles of Singapore, which has eyed for a global
reach for its investment.
The transition is taking place at a time when
Singapore is suffering the worst economic problems
since 1960s. Temasek, racked a return of about 17 per
cent a year since its inception in 1974 and March this
year, is also going to face a drastic restructuring of
its investment strategy.
Under her leadership, and also as wife of Prime
Minister Lee Hsian Loong, Ho led Temasek to embark on
audacious acquisitions in China, Asia, Europe and the
United States. Temasek’s buy-out of Shin Corp,
previously owned by former prime minister Thaksin
Shinawatra, in January 2006 sparked out a political
turmoil inside Thailand followed by a military coup in
September that same year.
Ho’s resignation has also sparked a debate inside
Singapore. Tharman Shangmugaratnam, the finance
minister, preferred to handle the issue with a
diplomatic term, saying that Ho’s departure wasn’t
linked to the performance of Temasek’s investments.
“Whether this is a way of making a change of someone
who is related to the prime minister, this has been a
point that I’ve dealt with since the first day Ho
Ching was appointed as CEO. I was very
instrumental in
bringing in Ho Ching and it was based purely on merit
and has nothing to do with her relationship to
anyone,” he said.
The investment analyst in Singapore said Ho’s
resignation was planned for about a year. “I don’t
think it has much to do with Temasek’s performance.
This is Singapore, favoured people are not made to
resign for performance! I think Singapore leaders are
more concerned over the Sovereign Wealth Fund issue.
It becomes more difficult to defend Singapore’s
sovereign wealth fund as a non-state actor with no
political agenda if the wife of the prime minister is
running it,” he said.
Singapore’s economy is facing a severe downturn, with
growth rate plunging into the negative territory. “We
recently revised downward our GDP forecast to
minus
2.8 per cent to reflect the likelihood that the
contraction in the first half of 2009 could be deeper
than previously expected,” said Citi’s Asia Economic
Outlook and strategy (January 23, 2009). “Advance
estimates for the fourth quarter of 2008 showed a
contraction of 2.6 per cent from a year ago, down
sharply from 0.3 per cent the previous quarter. On a
quarter on quarter seasonally adjusted annualised
rate, the fourth quarter GDP contracted 16.9
per cent
- the worst on record.”
Singapore has recently entered into a currency swap
arrangement with the US Federal Reserve, which worked
out the swap arrangements with selected countries
including Brazil and Korea, to avert the financial
crisis, data of the US Federal Reserve show.
Unlike Korea, which has drawn down the currency swap
arrangement, Singapore has not yet drawn down the
swap.