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Friday, April 9, 2010 By

So long, Harvard: GIC reviews investment strategy

The Government Investment Corporation of Singapore is having second thoughts about its investment strategy after losing billions of dollars in the recession, reports the Financial Times.

The Harvard or Yale investment model no longer looks so attractive.

GIC deputy chairman Tony Tan says: "The whole idea of the endowment model has been very influential (before). But any reasonable investor would (now) want to take another look at this."

But, by his own account, the Singapore sovereign wealth fund had done "little intellectual work" to be prepared for the liquidity risk problem caused by the Wall Street meltdown. Liquidity risk arises  when an asset or security cannot be sold quickly enough to prevent a loss or make a profit.

The long-term investor was caught flat-footed by the economic crisis. The Financial Times explains:

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Tuesday, February 23, 2010 By

GIC’s UBS losses could amount to 3.9% of GDP

Finance Minister Tharman Shanmugaratnam said in his Budget speech yesterday that Singapore's "large" estimated basic deficit of 8.5 billion Singapore dollars (about $6 billion) for financial year 2009 amounted to 3.3 per cent of the gross domestic product.

The Government of Singapore Investment Corporation's paper losses on the Swiss bank, UBS, could amount to more than that.

The Straits Times reported earlier this month that, converting notes into UBS shares, GIC could lose 7.85 billion Swiss francs (about 10.26 billion Singapore dollars).

That would amount to 3.9 per cent of the GDP.

Singapore's 2009 GDP was about 257.64 billion Singapore dollars at current market prices, according to the 2009 Singapore Economic Survey by the Ministry of Transport and Industry.(See chart.)

The finance minister said:

Because our economy contracted by less than
expected last year, our budget position has also turned out better than
projected. The basic deficit (Operating Revenues minus Expenditures for
FY2009) is now estimated at 8.5 billion Singapore dollars compared to the 14.9 billion
Singapore dollars that was expected.

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Friday, February 19, 2010 By

SGD20.5b Resilience Package worked though only a fraction of GIC, Temasek losses

The Economic Survey of 2009, released today by the Ministry of Trade and Industry, notes how the government fought the recession.

The centrepiece of Budget 2009 was the 20.5 billion Singapore dollar (SGD20.5 billion) Resilience Package, it says.

The stimulus worked. Singapore is out of the recession with overall unemployment down to 2.1 per cent.

Employed_residents_by_indus

Among Singapore citizens and permanent residents, the  unemployment rate fell to 3 per cent from 5 per cent with an estimated 60,100 residents out of work in December 2009.

The SGD20.5 billion (about $14.5 billion) Resilience Package was not only effective but cost-effective. It was a shoestring operation compared with the business activities of the two Singapore sovereign wealth funds.

The survey mentions the SGD5.1 billion the government allocated to help preserve jobs for Singaporeans.

That was only a fraction of the 11 billion Swiss francs (about SGD14.2 billion) the Government of Singapore Investment Corporation (GIC) invested in the Swiss bank, UBS.

GIC's paper losses on UBS alone could total about 7.85 billion Swiss francs — more than the entire outlay to protect jobs. GIC's UBS shares are now worth only about 3.15 billion Swiss francs, according to the Straits Times.

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Saturday, January 30, 2010 By

Should we follow US? State capitalism works: Tony Tan

Asian banks have a "once in a lifetime" opportunity of taking a bigger share of the global banking market and perhaps even overtake some of the big Western banks, Government of Singapore Investment Corporation (GIC) deputy chairman Tony Tan tells the Financial Times at the World Economic Forum in Davos. (The Financial Times wrongly calls him chairman: that position is held by Singapore Minister Mentor Lee Kuan Yew.)

You can see him being interviewed by Gillian Tett of the Financial Times here.

Here are some excerpts from the interview (here in full):

“For the GIC, we see no lack of opportunities in the developing world,” he said.

“I think Asian countries will now look again at whether we want to be (following the US),” he said, pointing out that even in the US there was a rethink of laisser faire economics. “State capitalism, interference by the state, has served (some countries) well,” he said.

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Sunday, January 10, 2010 By

GIC faces $575m loss in ‘biggest US real-estate blunder’

The Government of Singapore Investment Corporation (GIC) is reported likely to lose up to $575 million (about 800 million Singapore dollars) in what is being called "the biggest real-estate blunder in American history".

Read The Biggest, Baddest Real-Estate Loan in New York magazine to learn all about the $5.4 billion property on Manhattan's East Side whose backers now can't pay off a $16 million debt.

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Friday, December 11, 2009 By

Singapore buys top publisher with a mountain of debt

The Singapore government is buying a stake in the world's second largest scientific, technical and medical (STM) publisher, Springer Science + Business Media, reported to be more than 2 billion euros in debt.

The Government of Singapore Investment Corporation will take an 18 per cent stake in the debt-laden German company. The remaining 82 per cent will be taken by EQT, the private equity group controlled by the wealthy Wallenberg family of Sweden.

The deal is reported to be worth 2.3 billion euros (4.7 billion Singapore dollars) and includes about 2.2 billion euros of debt, according to Times Online and the Financial Times.

Goldman Sachs, Deutsche Bank, Barclays Capital and Unicredit have agreed to underwrite 1.72 billion eruos of new debt while EQT and GIC would invest about 450 million euros of fresh capital to repay debt at Springer, says the Financial Times.

Earlier, GIC bought stakes in the banking giants Citigroup and UBS when they were short of cash.

The Wall Street Journal says the deal represents:

  1. The biggest buyout deal in Europe in 18 months;
  2. GIC's first European co-investment;
  3. Possibly the beginning of a GIC push into the European markets.

Reports say Springer's British owners are selling their entire stake because no one was willing to buy a minority share on their terms. The deal "allows an exit for the two UK buyout firms that have owned the debt-laden business since 2003", says Reuters.

The Springer website says the deal "will give the Springer Group medium-term stability by removing imminent potential refinancing issues".

On the plus side, Singapore gains a top-flight international publishing business, which may be useful for a city-state aspiring to be a leading education and research centre.

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Filed Under: Media, Singapore Tagged With: , , , , , , , ,
Wednesday, April 8, 2009 By

Sell Singapore dollars, advises UBS

Investors are being advised to sell Singapore dollars by the Swiss bank UBS, in which the Government of Singapore Investment Corporation (GIC) has a big stake.

Investors should sell both the Singapore dollar and Malaysia’s ringgit against the dollar and the euro to profit from a forecast weakening of Singapore’s currency at a policy meeting next week, according to UBS AG,  Bloomberg reported yesterday.

“The ringgit would be dragged along with the Singapore dollar if, as we expect, the Monetary Authority of Singapore eases the Singapore dollar monetary policy at the April 14 meeting,” Ashley Davies, a Singapore-based strategist at the world’s second-biggest currency trader, wrote in a research note. Given the Malaysian central bank’s “apparent guidance to keep the ringgit within a tight range against the Singapore dollar, this is also likely to weaken the ringgit.”

The Bloomberg currency calculator shows Singapore dollar has now fallen to about 1.51 Singapore dollars against the US dollar, down from about 1.50 Singapore dollars yesterday.

GIC invested a massive 11 billion euros in UBS in December 2007, according to the Straits Times.

Filed Under: Singapore Tagged With: , , ,
Thursday, March 19, 2009 By

‘Life would be easier if MM were not my father’

Now you have seen the video, download the audio where Singapore’s Prime Minister Lee Hsien Loong laughs and says: “Life would be much easier for me if the Minister Mentor were not my father and Ho Ching were not my wife.”

He was replying to the BBC interviewer who asked him if the people would blame his family for the losses suffered by the two Singapore sovereign wealth funds.

PM Lee said: “The Minister Mentor is the chairman of GIC not because he is my father. It’s because he is the best man for the job and he has been chairman since he was prime minister. And Ho Ching is CEO of Temasek not because she is my wife but because the chairman of Temasek and the board decided that they wanted to appoint her as CEO. And they are there as long as they are effective, performing, and if they don’t perform well, they will have to take the consequences.”

The interviewer persisted and asked if it might have been better if his family had a lower profile.

That’s when PM Lee laughed and said: “Life would be much easier for me if the Minister Mentor were not my father and Ho Ching were not my wife. But they are there and this is the way Singapore has worked. And I think Singaporeans have understood that this is how the the system works. And they will render judgment when elections come.”

Asked if he anticipated some shows of public anger or displeasure, he said: “I think it’s quite understandable that in a situation like this Singaporeans will be quite anxious, will be worried about their future. And I think they have seen what the government has been doing. We had a very decisive budget this year. The package was not only a big one but a very directly focused one on saving jobs and helping people to see through the downturn.”

PM on his salary

The interviewer said: “Finally, Prime Minister, I read that you are apparently the highest paid head of government in the world. Your salary is about four or five times what President Obama gets. Are you worth all that money?”

PM Lee laughed and said: “I am not comparing myself and I don’t look at these rankings.We go on a system which is open, honest, transparent – what is the job worth, what is the quality of the person whom you want. We need the best people for the job and these are jobs where you make decisions which are worth billions of dollars. And you cannot do that if you are pretending and you just say, ‘Well, we are all in it for the love of King and Country’. We want it to be honest, we want people not to come in for the money. But at the same time the sacrifice cannot be too great. And at times like these, you want the best possible government you can have.”

Filed Under: Singapore Tagged With: , , , , , ,
Sunday, March 8, 2009 By

Singapore law change amid US sanctions threat

Singapore will introduce new legislation that will make it harder for foreigners to evade taxes back home by hiding their money in bank accounts in the city state. Singapore will “assist (other countries) on bona fide requests for information”, the Finance Ministry announced on Friday.

The announcement came three days after the Obama administration backed a bill to crack down on tax evaders.

Singapore, Hong Kong and Switzerland are among 34 countries listed in the Stop Tax Haven Abuse Act, which threatens financial sanctions against “foreign jurisdictions, financial institutions, and others that impede U.S. tax enforcement”.

President Obama was one of the three senators who co-sponsored the bill, which is now being moved forward by Senator Carl Levin of Michigan.

Washington is coming down hard on tax fraud as evident from its legal battle against UBS. The Swiss bank agreed to pay $780 million in fines and hand over to US authorities account details of around 300 clients to settle criminal charges.

Singapore has been following the case as GIC invested 11 billion Swiss francs in UBS in December 2007.

Minister Mentor Lee Kuan Yew recently told bankers that Singapore could not escape the pressure being applied to Switzerland. "We must move with the flow," he said, according to the Financial Times.

The Finance Ministry said the law will be amended in the middle of this year to “endorse” the standard adopted by the Organization for Economic Cooperation and Development, which includes America and Britain.

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Filed Under: Singapore Tagged With: , , , , , ,
Wednesday, March 4, 2009 By

Straits Times snips off MM Lee interview

The Straits Times has run the Reuters interview with Minister Mentor Lee Kuan Yew, omitting  a few paragraphs.

Here’s the omitted last paragraph from the original Reuters report:

Singapore's opposition parties wield little influence and often complain of poor access to mainstream media.

Reuters also quotes him as saying about the Government of Singapore Investment Corporation (GIC) buying Citigroup and UBS shares:

"How could we have known this was the extent of the damage? You look at all the big-name banks that have gone down, misjudged the situation, ruined their careers," he said.

"When the market fell, we went into UBS and Citi. But we went in too early. That is part of the ride."

And did the Straits Times notice what Reuters says about the Citigroup shares seems to contradict earlier reports based on what GIC said?

According to the Reuters report, published by the Straits Times:

GIC last week converted its $6.88 billion worth of Citigroup preference shares into common stock at a price of S$3.25 a share to shore up the embattled U.S. lender, realising in the process a loss of around half its initial investment.

The Straits Times’ sister paper Business Times earlier reported: 

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