Tuesday, May 19, 2009

About Temasek and the bike

Hi Friends,

I cannot resist a dig at Temasek.

This rant is perhaps born out of a need to vent out my anger and frustration. What happened at Temasek is akin to what happened to me the past week.

I felt a sudden need to buy a bicycle.

Don’t ask me why, I just needed one. Actually it is a little more complicated than that. My son T wanted a bike and after doing research about bikes for him, I decided I needed a bike too! (Long story- I would get a bike, he will try it out and if he likes it he can keep it or if not I will buy another. And I get to keep this one)

Anyway, after checking with 2 of my triathlon doctor colleagues and perusing through Spin Asia mag (which I found out after zipping in and out of 6 petrol kiosks, is available only from Esso/Mobil) and clicking through numerous websites trying to shave off a few dollars here and there before I decided on the perfect bike ( for me).

Something which is good- but cheap.

What has all this to do with Temasek, you ask?

Well, whilst reversing out from a driveway, I snapped the left wing mirror of my car on a pillar. My usual precise maneuver of extending and retracting the motorized mirror while negotiating the 4-6 cm gap between the pillar and car did not work this time. Perhaps the news about Temasek was on the radio, or maybe I was still thinking about the Pink Dot- but I really can’t remember.

But those who live in the north-east would no doubt know how I felt last Saturday morning because you would have heard a loud bawling and howling followed by a string of unprintable vernacular curses.

It wasn’t that I found out from Mike, the workshop boss, that the wing mirror module from this Bavarian manufacturer would cost $1000. Mike even assured me that I was lucky that I called him as the authorized workshop would charge even more. Lucky me!

It was not about the 1K (really) –but it was that I scrimped ( or schemed) and saved (ok- slightly dramatic but you know what I mean already) in order to save a few dollars to get my perfect bike and bam wham thank you ma'am- I had to pay much more for something which no one would even notice!

So Temasek is up to its contrarian investment strategy again! Whilst common folks like us schemed ( or scrimped) and saved to either
a) make ends meet, or
b) save for a rainy day, or
c) spoil ourselves because we deserve a little luxury now and then,

Temasek loses a chunk of our life-savings. Again.

The CNBC guy said Temasek was stupid and had done it again (not verbatim but something to the effect).
Addendum : CNBC's Foster said“A $4.6 billion loss on a $5.9 billion dollar investment. TPG lost $2 billion really quickly on Washington Mutual, but this one guys, is right up up there, as one of the worst investment during this period for one single investment fund.”
Why can't she just sit on her hands these next few months! Why can't she just go on leave till her next project? Why?
Buy high- Sell Low! Brilliant!

Dr.Huang Shoou Chyuan

PS: I bought a cheap and good bike.
I paid my 1 K tuition fee on how not to reverse a car into a pillar
MSM actually printed 2 letters essentially saying what I wanted to say but failed to.

Letters from MSM

1.Denis Distant
ST Forum Page 18.5.09

Temasek must set example on transparency

I REFER to last Saturday's column, 'Temasek should clear the air', on the massive loss arising from Temasek Holdings' sale of its stake in Bank of America (BoA).
Temasek is neither a private equity fund nor a hedge fund, but it handles billions of dollars which belong to Singaporeans.

BoA's share price ranged between US$2.53 and US$14.81 during the period Jan 2 to March 31, when the sale is believed to have been made. This makes it well-nigh impossible to guess the size of the loss, except that it must be in billions of dollars.

After being told that the investments were for the long term - when the markets in the United States crashed after Temasek had invested heavily in US financial stocks - Singaporeans expect Temasek to explain the timing of the sale and the reasons for it. Do the reasons relate specifically to BoA or generally to the US stock market? Surely it cannot be due to diversifying the geographical distribution of future investments.

Temasek must give the lead and be transparent if other listed companies on the Singapore Exchange are expected to do so.
Denis Distant

2.Conrad Raj (Today 18.5.09)

What happened to your ‘long-term’ view?
Temasek ought to clear the air on sale of BofA stake and investment in ABC Learning

CONRAD RAJeditor-at-large conrad@mediacorp.com.sg

THE question on most observers’ lips following the disclosure of the sale of Temasek Holdings’ 3-per-cent stake in the Bank of America (BofA) must be: Whatever happened to the sovereign wealth fund’s (SWF) strategy of taking a long-term view of its investments?
After all, it has been drummed into us almost ad nauseam that both Temasek and its cousin, the Government of Singapore Investment Corporation (GIC), invest for the long term with a time horizon that could stretch for as long as 50 years.
In fact, this was reiterated at a grassroots meeting on Saturday night by Finance Minister Tharman Shanmugaratnam when he said the Government takes an overall and long-term view of its investments by state-owned vehicles like Temasek and GIC.
“We track, engage and evaluate the performance. But we don’t just look at six months or one year,” he was reported to have said.
And in a recent speech to the Junior Pyramid Club, Temasek’s chief executive officer Ho Ching talked about the SWF’s investment policy with reference to Minister Mentor Lee Kuan Yew, who has said that our investment decisions are for least one, two decades.
“Likewise, we invest with the appetite of a young 35-year-old (the age whenMr Lee became Singapore’s first Prime Minister) for growth and risk-taking.
“At the same time, we also share his thoughtful conservatism to plan and provide for his children’s needs for another 10 to 20 years, while he invests to build his rainy day and retirement kitty with a 30- to 50-year horizon.”
No doubt it wasn’t a conscious decision by Temasek to invest in BofA. The investment agency had actually bought an initial US$5-billion ($7.4-billion) stake in investment banking giant Merrill Lynch in Dec 2007 and added another US$1 billion last July to become Merrill’s single largest shareholder with a 13.7-per-cent stake. Following the purchase of Merrill by BofA, Temasek’s stake was converted into 189 million shares of BofA or a 3-per-cent stake.
Obviously, Temasek didn’t think much of the long-term future of BofA andhence its disposal of those shares at a whopping loss of between US$2.8 billion and US$4.7 billion, depending on when the BofA shares were sold. BofA shares traded between US$2.53 and US$14.81 in the first quarter of this year.
Many question the timing of the sale, especially when the price of banking and other financial stocks appear to be on the rise.
Surely, in the wake of its huge 30-per-cent-or-more decline in the value of its investments and some bad investment decisions like its $400-million loss in Australia’s ABC Learning, there must be some accountability on the part of Temasek.
While Temasek points out in its 2008 review that “good governance in and of itself does not deliver value”, it also notes that “good governance can help assure the sustainability of an institution beyond the contributions of any individual or team”.
Well, good governance requires a good deal of transparency. How can it demand transparency from its subsidiaries and other companies, if Temasek itself remains reticent? And why do we have to learn about its investments or disposals from news reports abroad?
As stakeholders, we should have some insight into the investment decisions of our SWFs. What was the thinking behind the disposal of the BofA shares? Is Temasek changing its investment policy?
It can’t be because Temasek could not have a direct impact in the running of BofA as it held a mere 3-per-cent stake in the American banking behemoth, unlike in the case of Merrill, where it was the single largest shareholder with an almost 14-per-cent stake.
But, then again, Temasek has been a passive investor in other companies, especially overseas, including in other banks.
Or is Temasek clearing the deck for CEO-designate and former BHP Billiton CEO Charles “Chip” Goodyear so that he starts with a clean sheet when he formally takes over from Madam Ho Ching in October?
Or as a posting on the Financial Times suggested, the folks at Temasek are “trying to get the house in order” and “they’re not buying the green shoots hype” out of the US.
Or is this part of Madam Ho’s revised investment strategy where Temasek will invest 10 per cent of its assets in emerging markets, 20 per cent in developed economies, 30 per cent in Singapore and 40 per cent in the rest of Asia outside of Japan?
For sure, Temasek has come a long way since its inception in June of 1974 with an “eclectic mix of some 35 investments valued at about $354 million” into Singapore’s second-largest corporate entity, which despite a 31-per-cent fall from end-March 2008, still was worth some $127 billion as at end November.
But some clearing of the air on things like the sale of the BofA stake and its ill-fated investment in ABC Learning will help restore some confidence in our Temasek.


Gerald Giam said...

You mean "scrimped and saved". :P

My sentiments exactly. But sadly i think Singaporeans will huff and puff about it now, but when the polls come around, they'll still vote for the govt that lost $6.8bn of our savings. I hope I'm wrong.

nofearSingapore said...

Hi Gerald,
Thanks for the heads up about "scrimped" instead of "skimmed". Got it changed already.
That's why I always say the internet is indispensable in this day and age.
Great work at the TOC!

Anonymous said...

Mr Huang,
for your interest.

Kenneth Jeyaretnam (JBL's son) commenting in

"Whilst getting hot under the collar over the $4.6 billion realised loss on Temasek’s sale of the BofA stake, let us not forget that total losses on Temasek’s portfolio between March and November last year were admitted to be US$39 billion. After April’s amazing rally (the jury is still out on whether this is just another bear trap) equity indices are slightly higher than they were at the end of November so maybe Temasek’s portfolio is looking slightly rosier than it was at the end of November. However we do not know the breakdown between realised and unrealised losses (surely the bulk of the portfolio), what hedging strategy was adopted (if any), and what the marking policy was for assets not sold. Any trader knows that there is often a big difference between where a position is marked (based usually on the last traded price and in the case of illiquid assets on some sort of average price given by brokers) and where it can be sold. This divergence is the more marked the bigger the position is in relation to the total volume of trading in that security. So I think one can safely assume that if Temasek had had to sell all its assets at the end of November its total losses would have been higher than US$39 billion (possibly a lot higher). This would still be true today even though market sentiment and liquidity has markedly improved. So lets not lose sight of the wood of what the total portfolio is worth today by concentrating on the trees of crystallised losses on individual positions.When talking about these kinds of losses it is really beside the point to brag about being prudent on a budgetary level. It is good that Singapore has the luxury to wait the ten years or more it may take for markets to recover, though its senior citizens may not have that long to wait. To improve accountability and make ordinary Singaporeans feel that they benefit directly from the investment management skills of Temasek and GIC and are able to vote on the management, we believe that some way should be found of spinning off shares in these and other GLCs to Singapore citizens."

nofearSingapore said...

Hi anon (11.48):
Thanks for attaching Kenneth's comments.

One way to see this is that those guys are just as clueless as the rest of us.

We know that every investment comes with risks. Sell too early or too late also may attract some flake BUT this is public money and we expect more than the usual standards that we expect of ourselves.

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