20150202 If Temasek is a savvy investor, why does it ‘buy high/sell low’?

I am an ordinary Singaporean trying to figure out the reason for Temasek’s opacity. As a citizen, I am also the rightful owner of more than $60,000 in the reserves managed by Temasek. As the fund manager of citizens, Temasek can ill afford to be not transparent.

Although PM Lee has said “Never forget that we are servants of the people”, the PAP has continued to act as if they are the masters. If not, the PMO should have already replied to my queries on Temasek CEO’s remumeration.

The PAP keeps stressing on the prudent use of our reserves but it is not bothered when it comes to Temasek’s remuneration. Since 2004, tens of million$ (maybe even more than $100 million) have been paid to CEO Ho Ching and hundreds of million$ paid to it board of directors. Their remunerations are paid from our reserves.

For decades, the foreign media have described Temasek as a very savvy investor. But without transparency, do they even know? The answer is ‘they don’t’ and the worse thing is Temasek believes this to be true and continues to be suckered into all sorts of get-rich-quick (bottom-picking) investments.

Foreign media would do well to delve into Temasek’s history and trace the origin of its funds. For example, Singtel was transferred to Temasek and our parliamentary record does not mention the transacted price paid by Temasek (no checks in parliament despite Singtel being valued by the market at $60 billion). This would mean Temasek effectively received a $60 billion capital injection. With an average net profit of $2.5 billion for the last 20 years, if Temasek had not divested 48% of Singtel, this would mean its contribution alone to Temasek is $110 billion. Savvy investor?

When Temasek claims it is making money from its foreign investments, it should take into account the opportunity costs ie divesting Singtel. If Temasek did performed as well as it claims, it should show us the figures and not expect to take the public for a ride.

Temasek claims its 40-year TSR is 16% ie a $1000 investment increases by 37,000 % to $378,721. calculator At 5,000 %, its 30-year TSR of 14% is nothing short of a miracle. Common sense tells us these are half truths.

Temasek’s 20-year TSR then suddenly collapsed to only 6% ie a $1,000 investment increases by only 320%! So what happened after 1994? Was Temasek not interested to make 16% or 14% returns? Without consistency, such a fund manager in the private sector would have probably closed shop before it could even state its nonsensical claims.

A savvy investor doesn’t make as many wiped-out investments as Temasek. Nor does its long-term performance drop overnight.

In disclosing its ‘investments and divestments’, Temasek has actually revealed it’s not a long-term investor but a speculator.

DJIA chart showing Temasek’s investments and divestments (year end in March)

Near the top of the stock market (business) cycle in 2008, Temasek had invested a record $32 billion of our reserves. When the stock market tanked, Temasek divested $16 billion of investments, many at rock-bottom prices eg Barclays Bank. Is this the performance of a savvy investor? If Temasek’s divestments in 2009 were indeed ‘profit-taking’, it should disclose relevant information.

The figure of $16 billion divested is actually meaningless without stating which investments were divested. Say, if Temasek had panicked and reached its ‘BTH’ level, the $16 billion could have been 50% of the original investments. Or worse, only 30%. After all, didn’t Minister Lim Swee Say already confirmed that “many investments had been lost during the global financial crisis” by GIC?

Near the stock market bottom in 2009, Temasek invested only $9 billion but divested $16 billion ie net divestment of $7 billion. Near the stock market top in 2008, Temasek made a net investment of $15 billion ($32 b – $17 b).

Common sense tells us investors always attempt to ‘buy low/sell high’. Was Temasek a savvy investor when it frequently executes the reverse strategy? Why did Temasek divest a near-record $16 billion of investments at ‘pasar malam’ prices if these are long term investments and due diligence had been conducted? What do you think?

The funny thing is Temasek’s assets under management keep increasing. Is this due a total of $35 billion in capital injections? Is this from its bond issues? Or perhaps the transfer of Changi Airport at a 10th of its true market value whereby its value could be increased instantly at Temasek’s whim? Nobody knows what’s really happening and it’s about time the PAP cease taking Singaporeans for a ride.

(Did the PAP throw a $2 billion at SMRT and SBS Transit to improve Temasek’s bottom line? Did the PAP increase our fares last year and will do so again this year because of Temasek’s vested interests? Are we, as taxpayers and public transport commuters, paying the ultimate price for Temasek’s folly in investment? Without transparency, we will never know. The strange thing is parliament has not been bothered about transparency at Temasek (and GIC) since the last election.)

From the data disclosed, the only conclusion is Temasek is not the savvy investor as portrayed by the media. It is laughable when Temasek executes a ‘buy high/sell low’ strategy but continues to make nonsensical claims about it long-term performance.

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One Response to 20150202 If Temasek is a savvy investor, why does it ‘buy high/sell low’?

  1. Xmen says:

    Brilliant analysis!

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