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Singapore: Buy High, Sell Low II |
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Written by Our Correspondent
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Friday, 05 June 2009 |
 Bailing out on Barclay's with massive losses, Temasek forgets to tell Singapore's citizens about it
Singapore officials' sense of superiority has taken another beating. A
behind-the-curve bunch of sheep with MBAs may now be the truer image.
While the sovereign wealth fund of Abu Dhabi has cleaned up on its
investment in Britain's Barclays Bank, Temasek Holdings, still headed
until October by Ho Ching, wife of Prime Minister Lee Hsien Loong, has
bailed out at a loss estimated at around US$850 million.
The
news didn't come out of Singapore, where embarrassments involving the
first family get the minimum attention, but from analysts in London and
New York studying the movement of major shareholders in Barclays. The
citizens of Singapore were apparently not worthy of being told of how
their money is being mismanaged.
Not content with buying into
Barclays at a time when the banking sector was viewed as the way to
easy riches, Temasek sold out close to the bottom of the market. The
Abu Dhabi International Petroleum Investment Corp meanwhile bought in
when Barclays was desperate and sold out just this week when the
Barclays share price had recovered, netting a profit of £1.45 billion
sterling (US$ 2.2 billion) in just seven months.
The Temasek
debacle followed hard on the heels of massive losses on a Bank of
America stake mostly acquired near the top of the market and sold close
to the bottom. Temasek's loss is estimated at US$4.6 billion, or
roughly US$1,000 for every Singaporean citizen. After the sale,
presumably in March, the share price promptly rose by 66 percent.
Singapore
Finance Minister Tharman Shanmugaratnam has claimed that despite recent
losses Temasek has made gains averaging a respectable 15 respectable a
year. However, this was during a sustained global bull market and also
reflected the fact that some of its assets were state-owned companies
whose shares had been transferred at non-market prices. These included
power stations which have been sold off over the past two years,
generating large gains which cannot be replicated.
Some aspects
of Temasek are also so obscure that no proper analysis is possible. One
black hole looks to be a leveraged investment in a series of private
equity funds at the top of the market.
Having bought into
financials near the top – making them 40% of its total portfolio -- and
sold off near the bottom, it is now focusing on commodities, most
recently buying a stake in locally listed agriculture company Olam
international. It got a 13.76 percent stake at an 18 percent discount
to the market, nonetheless it had already almost doubled in price this
year thanks to a rebound in commodities which may or may not be
sustained.
Not that it is completely neglecting financials. It
is considering a stake in a consortium to buy AIG's asset management
business. But potential partner in this is the high-profile Hong Kong
businessman notorious for losing shareholders' money – Richard Lee of
PCCW.
Nor can Temasek ignore the problems of Singapore state enterprises
which must compete internationally. It has just had to inject equity to
reduce the massive debt of money-losing ship-owner NOL. Meanwhile it is
trying to offload loss-making manufacturer Chartered Semiconductor.
In short, Temasek's bad news is unlikely to be over. But don't expect to hear about it first in the local media.
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Economics/Business 
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