20140914 Temasek not a long term investor as claimed but a speculator

Temasek’s transactions need to be scrutinised by Parliament because it is not the long-term investor as claimed.

According to a 2011 Bloomberg article, “Temasek Holdings spends $2.8 billion for shares in China Construction Bank”, Temasek bought the same shares it had sold only 8 weeks earlier. (see chart below)

Buying and selling within 8 weeks is considered long-term investing or punting?

According to the same article, “Temasek said after the sale that it remained “bullish” on CCB”. Temasek’s sale of CCB contradicts its statement because when one is bullish on a stock, one does not sell but buy.

Temasek said the sale was part of its “portfolio rebalancing”. A “portfolio rebalancing” would have required Temasek to invest in companies unrelated to CCB in non-banking sectors.

Temasek’s statements were therefore nonsensical at best.

Parliament must not continue to allow billions of our reserves to be transacted by Temasek at its whim. Temasek was clearly not investing for the long term in the above CCB transaction and appears to be speculating.

PS

According to the New York Times, “Temasek’s chief, Ho Ching, likes to take risks”.

I would like to thank Chris K for his comments on my TRE post that (Temasek) “Being a long term investor does not mean one is not opportunistic.”

My reply to his comments:

Phillip Ang:

I do not disagree with Chris K that Temasek could be opportunistic. But is CCB, which has been range bound for 3 years an opportunity when the S&P has gone from 1200 to 2000? And what about other stocks?

I highlighted the silly reasons given by Temasek – if it claims to be bullish, then it should have just held on to the stock. No competent fund manager would say he is bullish but sell, bearish but buy.

The more ridiculous part was about “portfolio rebalancing”. It means selling Stock A and buying Stock B. Instead, Temasek sold Stock A and bought even more of Stock A only 8 weeks later.

The cash raised from the sale of CCB could have been used for better investment opportunities.

Being opportunistic should not mean allowing Temasek to trade like a speculator because our reserves are not meant for short term trading. It should mean investing like Warren Buffet and taking a long view of the market.

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7 Responses to 20140914 Temasek not a long term investor as claimed but a speculator

  1. Xmen says:

    The elephant in the room is the balance sheet of Temasek (and GIC). Are securities marked-to-market? Are they taking a “long” term view on positions that have unrealized losses to avoid scrutiny and embarrassment? We won’t know until they open the book or a new government takes over.

  2. KKLow says:

    Temasek has turned the Chinese bank market into a casino. Lucky they got it right this time. What happens next is just another BIG/SMALL

  3. gks says:

    Selling the CCB shares at $6.26 and buying it back at $4.94 was a very wise move, that helped to prevent a further loss of $1.32/share (approximately 21%). Perhaps buying CCB initially was a gamble but that would have depended on what was the original purchase price.

    • phillip ang says:

      If Temasek were a long term trader as it has always claimed, then it shouldn’t be buy and selling for capital gains within months. A day trader should not keep an overnight position regardless of what the outcome may be.
      If you say this is a wise move, what about its investment in Cheniere Energy? Temasek invested at below US$20, sold off in less than a year at below $28. At its high the following year, Cheniere price tripled.
      Temasek must decide on its trading strategy and stick to it. If you analyse its investments, there has been no consistency. Worse, many investments have no exit plans although they have soured. 😦
      Other than the original investment of $1 billion at IPO below $3, the rest of the purchases are really nothing to shout about. CCB has been in a long term range, between $8 to $5.

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