Temasek
Selling Merrill Lynch
Half or total of 87m
shares have been sold off at a loss, according to US recorded
filings. By Seah Chiang Nee
Jul 24, 2008
Temasek
Holdings has sold off half its ill-timed investment in Merrill
Lynch - or about 87m shares, according to a mutual funds report on
institutional trades on US stocks.
The
online report, MFFAIRS (Mutual Fund Facts About Individual Stocks),
reported it sold off 86,949,594 shares (50%), leaving a current
holdings of 86,949,594 shares (50%), according to the filings made
public.
The
report gave no exact date or price of the sale.
(Update: Making no reference to Mffairs reported sale, aTemasek
source says its ML shareholding has remained unchanged at 86.9m
since March. See accompanying story).
Neither
has there been any confirmation from Temasek, which had paid US$48
a share last year.
http://www.mffais.com/newsarticles/2008-07-22/2473637-211738.html
Last
week Merrill Lynch was traded at $31.
At
that price Temasek would have suffered a loss of $17 a share - or a
total loss of about US$1.48b for the 87mil shares.
Despite
massive write-downs and capital injection, Merrill Lynch's outlook
remains uncertain, reports Bloomberg.
The
company's equity capital position is weak relative to competitors,
said Brad Hintz, a New York-based analyst at Sanford C Bernstein,
reports Ambereen Choudhury.
"With
$19.9b in CDOs still frozen on the balance sheet and with
counterparty risk rising on the hedges underlying these troubled
positions, the potential for additional material write-downs
remains a concern,” Hintz said.
The
New York-based firm's credit rating was cut last week by Moody's
Investors Service to A2 from A1.
The
third-biggest US securities firm probably will report a loss of
$6.57 a share this year, compared with an earlier forecast of
$1.07, Hintz said.
The
revised estimate assumes the company generates no earnings in the
second half.
Merrill
may have to take an additional $10 billion of pre-tax write-downs
related to its holdings of mortgage securities, Moody's
estimates.
Huge paper losses
The disposal leaves Temasek Holdings and the
Government Investment Corporation (GIC) still holding substantial
parts of big troubled Western banks.
Its
remaining investments in UBS (Switzerland), Citigroup, Barclays and
Merrill Lynch - at an original cost of US$21.88b - have declined on
by some 47 percent in value.
That
is a paper loss of US$10.28b. However, Minister Mentor Lee Kuan Yew
had said these investments were made as a long-term strategy of 30
years.
But
as the Merrill Lynch sale shows, Temasek is not inflexible about
cutting losses, if things threaten to get worse.
The
political leadership has defended its investment of these sub-prime
banks as “an opportunistic” foray that can happen once in a long
while.
It
believes these companies will survive the crisis and emerge
stronger.
Some
experts believe that Temasek has made an error of
judgment.
Investment
guru Jim Rogers said in July he believed that US bank stocks could
fall further and predicted that Singapore's state investors would
lose money on Citigroup and Merrill Lynch.
"I'm
shorting investment banks on Wall Street," the successful investor
said. "It grieves me to see what Singapore is doing. They are going
to lose money."
At
the Nomura Dialogue recently, Minister Mentor Lee Kuan Yew reported
to investment mistakes, but that no one had benefited from
it.
Singaporeans
who want to see greater transparency in the government’s
investments in troubled companies are unhappy with this vague
answer to a serious problem.
One
writer said, “Should we just move on? I do not think so. The
patently huge mistake is not merely the result of recklessness but
rather a systemic lack of accountability in making some of our
largest investments.
“Let
it be clear, the harm is terminally done. The entire reserves
system must be re-examined and audited.”
Said
slohand, "I saw the interview on TV last night and felt
shortchanged.
"He
brushed aside the issues with the logic that since the officers who
made the decisions were not the beneficiaries in any sense of the
word, such lapses are mistakes and are therefore
acceptable...
"..The
size indicates that it can only come from the very top."
The
skies are dark but the storm has not broke yet.
By Seah Chiang
Nee
