20150725 PAP government should provide breakdown of Temasek’s $43 billion increase in portfolio value

PAP should be upfront with Singaporeans on the management of public funds by Temasek Holdings. Our reserves belong to ALL Singaporeans, not PAP.

Temasek should not simply claim its portfolio value has increased by $43 billion without providing any breakdown.

According to Temasek Review 2015, there are many multi billion dollar investments in China which contributed significantly to the increase in portfolio value, such as those in the table below.

Investments in HK$
Market Cap (HK$ millions)

Name % holding Mar-14 Mar-15 Inc/Dec % Inc Inc HK$ (mil) Inc S$ (mil)
AIA Group 4 443219 587843 144624 33 5784
Bank of China 1 920160 1529031 608871 66 6089
China Const Bank 6* 1353342 1621468 268126 20 16087
China Pacific Insurance 2 200800 368914 168114 84 3362
ICB of China 2 1552886 2135011 582125 37 11642
Ping An Insurance 2 425532 876986 451436 106 9028
. . . . . Total 51992 9202

*BT report CCB stakes as 6%, Temasek Review 5% as at 31 March 2015

2 Concentrated positions in Chinese companies exposes Temasek to significant risks and it seems to have not learnt any lesson from GIC’s stake in UBS. The Chinese stock market bubble had increased Temasek returns significantly and any reversal of fortunes could also wipe out all the gains, probably more.

On July 8, the Chinese government suddenly banned investors with stakes of more than 5% from selling for 6-months. Temasek’s 6% stake in China Construction Bank shares worth about S$17 billion on July 9 has lost about 30% of its value in less than 2 months.

How to create a stock market bubble

Image credit: Bloomberg

The meltdown has already started and if, say, the Shanghai Index collapses back to 2000 level, Temasek will be at least $10 billion ‘poorer’ in FY 2016.

4 By taking concentrated positions, Temasek will be unable to dispose of its assets due to liquidity issue in a financial crisis.

5 Although it has been widely acknowledged that all assets are overinflated due to historically low interest rates, Temasek made a net investment of $11 billion and $14 billion in FY 2015 and FY 2014 respectively. Two years before the GFC, Temasek had also made net investments totaling $26 billion. Will history repeat itself?

6 In March 2014, Josephine Teo, SMOS for Finance, informed Parliament that “GIC, Temasek won’t take more risks to help fund govt spending”. Could Josephine explain why Temasek’s net investments were increasing during the last 2 years as global stock markets headed into the stratosphere?

7 On the domestic front, the PAP government has also been assisting Temasek to create value out of thin air with our reserves, money which does not belong to PAP.

Image source (edited)
Lo and behold .. Olam shares obeyed and quickly rose to overshoot $2.23.

Olam was a loser as is reflected by its share price since 4 years ago. If not for Temasek’s offer to take Olam private, its value would been decimated, joining the ranks of Noble and Golden Agr.

Temasek’s view is not shared by other investors and Olam has continued moving south; it looks set to break below its pre-offer price of about $1.50.

Temasek owns 1.425 billion Olam shares. If Temasek invested at an average price of $2, it would have spent almost $3 billion of our reserves since 2008.

After 7 years, Olam dividends have amounted to a miserable 31 cents per share, hardly anything to shout about.

8 Similarly, SMRT was about to break the psychological $1.00 support despite an initial 1.1 billion tax dollars to fund the BSEP. It was only speculation that an additional $1 billion, or more, to take over SMRT’s rail assets by the government that prevented SMRT’s fall below $1. SMRT’s value had shot up 60% as a result of its proposal to sell rail assets to the government.

Image source: FT.com

9 If not for government intervention, Temasek’s net portfolio would not have increased by $43 billion. The manner in which Temasek uses our reserves to support its investments, singlehandedly increasing its value, is a cause for concern.

Singaporeans should not be expected to trust the government blindly on investments involving hundreds of billions of our reserves. Why should PAP fear disclosing the breakdown of the $43 billion increase in Temasek’s net portfolio value?

PAP should come clean and start to earn the trust of citizens instead of hiding behind legislations to prevent disclosure.

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2 Responses to 20150725 PAP government should provide breakdown of Temasek’s $43 billion increase in portfolio value

  1. Xmen says:

    Temasek has issued about US$10b bonds to use as its capital. If investments from the proceeds of these bonds fail, the debt still has to be paid back (plus interest.) The borrowed money is like a margin account, and is a two-edge sword that can hurt in a market downturn.

    Given that some of their Chinese investments are frozen, Temasek may also have to address liquidity and cash flow issues.

  2. phillip ang says:

    Thanks. 🙂

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