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)|
|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|
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.
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.