Summary :
FT reports Temasek has 40% of it's portfolio in Financials.
Considering that financials has dropped up to 90% in certain cases,
Temasek is probably sitting on massive losses that if disclosed to
the general public would cause an outrage. Even on the "astute"
Merrill's investment with anti-dilution clauses that compensates
Temasek for losses in equity stake, Temasek is set to lose 2
billion on the Merrill's trade out of 5 billion invested last year.
The investments in financials probably equates to a 30% loss of the
entire portfolio of Temasek, and considering that the other 60%
portfolio of real estate, equities etc.. which would have lost
30-40% on average (by conservative measures). Temasek probably lost
50-60% of it's total portfolio in the last year. So much for
boasting about high annual returns of 6% in the last two decades.
All was lost in a single year and the managers of Temasek still
kept patting their backs and raking in huge salaries for the last
10 years. It will probably take another 10-15 years of 6-8%
annual growth for Temasek to recover the losses in the last year.
You can probably have monkeys trading and they probably could
better these well paid investment officers.
The right thing for Temasek is to have some accountability and
fire the high-paid executives who came up with this trade and
assauge the public that failure is not acceptable in a
government-linked organization which uses taxpayers money. World
class sovereign fund?? I think not. Say goodbye to your CPF money,
it's going to be locked up for a really really long time as the
govt probably doesn't have enough to pay out everybody in the short
term.
Here's the article :-
By Saskia Scholtes and Greg Farrell in New York
Published: January 7 2009 23:13 | Last updated: January 7 2009
23:13
Temasek, the Singapore state investment fund, is sitting on
significant paper losses related to its stake in Merrill Lynch, the investment bank acquired
by Bank of America last week.
The state agency’s unrealised losses could amount to more than
$2bn, excluding any hedges, according to a Financial Times analysis
based on publicly available filings.
The loss is emblematic of the damage the financial crisis has
wrought on sovereign wealth fund investments in the banking sector
and helps explain why funds have been reluctant to commit further
capital to banks.
Some 40 per cent of Temasek’s portfolio is in the financial
sector, and it has suffered paper losses on other investments,
including Barclays, Bank of China and China Construction Bank.
Temasek on Monday disclosed it had converted its 13.7 per cent
stake in Merrill into BofA shares following the acquisition.
On December 31, the last day of trading before the deal closed,
Temasek’s remaining stake in Merrill, for which it paid an average
of $23 a share, had dropped to $12.10.
After ploughing $5bn into Merrill between December 2007 and
February 2008, and with a further $900m commitment last summer,
Temasek owns 189m BofA shares, according to Monday’s disclosure. At
Wednesday’s opening price, they were worth $2.7bn.
However, Temasek appears to have sold more than 30m shares of
Merrill stock in the first and third quarters of 2008, according to
regulatory filings. Even if Temasek sold at the lowest possible
prices in these periods, the sales would have generated a modest
profit to defray some of Temasek’s unrealised loss.
Temasek declined to comment.
It could have been worse. Temasek’s initial investment allowed
it to buy more than 104m shares at $48 per share.
But after Merrill was forced to raise further capital in July,
the terms of Temasek’s original investment were reset. This
effectively bought Temasek 151m new shares in Merrill for just
under $6 per share, bringing the average price paid per Merrill
share to a little over $23.
Temasek’s investment suffered again in September, as Merrill
shares plunged on concerns about the US banking sector.
But any losses seemed to vanish when BofA agreed to buy Merrill
in an all-stock deal which valued the latter at $29 a share. BofA’s
shares have since slumped, however.
Additional reporting by John Burton in Singapore
Copyright The Financial Times Limited 2009
see this... (click to link)
09 Oct `08,
8:17AM
