20151001 Temasek and GIC should stop speculating in China stock market

Temasek Holdings and GIC do not seem to have learnt any lesson from past gargantuan investment losses and have continued to speculate with our reserves and CPF.

Speculation – when ‘good’ investments lose almost half their value or hundreds of millions within a few months. Another example:

Citic Securities.

Three months ago, Temasek and GIC bought 94.5 million and 78.5 million new shares respectively at a heavily discounted price of HK$24.60 per share. The Singapore government, which always makes a big hoo-ha when investing peanuts in citizens, threw S$739,000,000 at a securities firm without batting an eyelid.

According to CITIC Securities, it plans to use about 70% of the funds for “margin financing, securities lending, equity derivatives as well as fixed income, foreign exchange and commodities products”. In short, most of the money ‘invested’ by Temasek and GIC will end up in speculative activities of CITIC’s retail clients.

It has been only 3 1/2 months and our ‘investment’ has lost 44% or about S$325 million.

Source: markets.ft.com (6030:HKG)

According to another source, GIC holds a total of 101.86 million CITIC Securities shares or 4.47% as of 23 June.

Source: markets.ft.com

Including Temasek’s 4.15%, the Singapore government is now the largest foreign shareholder in CITIC Securities.

CITIC Securities’ share price had doubled due to speculation fueled by series of interest rate cuts as well as ‘encouragement’ from the Chinese government. Millions of retail investors who have recently opened trading/margin accounts, up to 4 million weekly, have now lost their shirts because they were merely speculating, not investing. What value did Temasek and GIC see in such a company?

How will losses of Chinese retail investors impact CITIC Securities? Why were its new shares offered at such a deep discount? Were Temasek and GIC trying to ‘pick bottom’ after it had fallen by 40%, ‘investing’ using the the same ‘tikam-tikam’ model again?

One thing for sure – something must be very wrong with our investing model. How could all the due diligence by Temasek and GIC result in a S$739 million investment reduced to only S$414 million in less than 4 months?

The government has always insisted other investments had compensated for past humongous losses. Where?

Wouldn’t it be better for the government to invest in Singaporeans instead of allowing GIC and Temasek to speculate using our reserves and CPF monies?

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4 Responses to 20151001 Temasek and GIC should stop speculating in China stock market

  1. Xmen says:

    I completely agree with your last paragraph – “Wouldn’t it be better for the government to invest in Singaporeans instead of allowing GIC and Temasek to speculate using our reserves and CPF monies?”

    There are many reasons why the benefits/returns on domestic investments far outweigh foreign investments. The government keeps claiming that Singapore is too small a place to invest. I agree only because the government has created an environment where private enterprises can’t succeed! Silicon valley, NYC, London have endless use for investment dollars because entrepreneurships are encouraged and not crowded out by the SOEs.

    Unfortunately Singapore has sowed the seeds for the epic fail of its private industries through years of suppression (of ideas, risk taking) of its best resource – its people. Good luck changing that in the next 20 years…

  2. phillip ang says:

    It is easier to invest overseas – since there’s no need for transparency, disclosure of failed investments is not required. No need to worry about losing face big time, as in Ho Ching’s Chartered Semicon and soon, NOL.
    PAP fears its image being tarnished most because our scholars don’t really know much about investment. Whoever is advising our scholars, I get the feeling that GIC and Temasek, being wealthy fund managers, is ripping us off big time.

  3. jim says:

    This cute, keep focusing in losing pieces of investment but not look at the portfolio as a whole…

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