20151207 Singaporeans better off without Temasek Holdings (2)

If Temasek were a fund manager in the real private sector, no sane person would invest in such a company. Really. I mean, why would anyone invest in a fund manager with selective disclosure of important information, whose CEO’s birthday is off limits and the pay package of every director kept a secret?

Singaporeans should exercise some common sense instead of relying on government propaganda to form an opinion on Temasek.

Critics who claim that I am merely cherry-picking bad investments to slime Temasek would do well by not defending Temasek with propaganda. The reserves belong to every Singaporean and it is our responsibility to ensure they are properly invested. Ignorance is stupidity, not bliss.

No doubt Temasek has made some good investments, the important question to ask is what is the net result after offsetting its gargantuan losses. Were profits from the sale of local companies used to make up for losses?

If lawmakers don’t even know the relevant investment details, Singaporeans should be very worried. If MPs don’t even bother to scrutinise our investments, perhaps there is really something very wrong and everyone is just pretending all’s well and kicking the $266 billion can down the road.

Does Temasek invest in solid companies or is it being reckless, engaging in speculation?

Common sense tells us that the shares of a good company increase over time. An example would be Apple Inc (below) which has increased 25 times since a decade ago.

Of course no one in his right mind expects every investment to be a winner but on the other hand, it is also reasonable to expect Temasek, with all the best talents Singapore could offer, not to pick stocks which collapsed 79% in 3 months, such as Eros. Mind you, Eros is not an exception. So what kind of due diligence did Temasek conduct, if any?

Eros investment is peanuts compared to some of our ‘concentrated’, multi-billion$ Chinese investments. They look good only on paper but are essentially very large speculative bets, such as CCB and ICBC (below). The share price of any good, established company doesn’t stay range bound for a decade. Why are our Chinese bank share back to 2007 levels?

CCB shares range bound for donkey’s years


Temasek doesn’t seem bothered by China’s growth which has been built on a mountain of debt. Temasek has continued to pile into Chinese banks, which appear cheap based on their price-to-book value, although no one really knows the kind of accounting gymnastics they have been practising.

Are Chinese banks really cheap?

Source: Bloomberg

Is this Temasek’s investment strategy?

After China’s stock market bubble had burst, Temasek attempted to instill some investor confidence with a token purchase of ICBC shares worth $25.4 million. (“Temasek raises stake in ICBC in vote of confidence after rout”) This raises Temasek’s ICBC stake from 9.97% to 10%.

Point to note is China’s market was valued at more than US$10 trillion at its height and it’s silly to expect $25 million to do wonders. Perhaps technocrats running Temasek are silly?

Over the past four years, Temasek has been boosting its ICBC stake but its share price doesn’t seem to reflect Temasek’s optimism. In fact, Temasek is sitting on paper losses on all these purchases. The headline is misleading and should have read “Temasek throwing good money after bad in ICBC investment”.

What will happen to our S$10 billion? investment in the event of a capital raising exercise?

Lessons never learned

Before and during the GFC, Temasek invested in financial institutions as if there was no tomorrow. After being hit by S$9 billion losses in Barclays and Merrill Lynch, it decided enough was enough in the west and headed east to invest tens of billions in Chinese companies.

Temasek then invented justifications for its concentrated, ie multi-billion, extremely-risky Chinese investments. But how certain is Temasek that Chinese financial institutions will not go the way of western ones which had led to its multi-billion dollar losses?

‘Concentrated’ investments carry too large a risk as is evident by Temasek’s 18% stake in Standard Chartered Plc. It is still sitting on an unrealised loss of more than S$8 billion after 9 years. Not to mention the opportunity cost of this lousy concentrated investment.

Does Temasek’s Simon Israel still “see value” in Standard Chartered?

PAP should be worried about our concentrated Chinese investments because each has the potential to be another Standard Chartered.

Everyone else stupid except Temasek?

In 2013, an analyst sounded a warning on Temasek and said that “their heavy exposure to Chinese banks surprises me a bit as they already burned their fingers once with their investments in banks during the global financial crisis”. link

But why should our elites even listen when they are not accountable to the public?

Goldman Sachs did not take profit on its ICBC investment and sold US$2.3 billion of ICBC shares to Temasek for the sake of selling. Many foreign funds have also exited China and Temasek is now left carrying the baby.

The Chinese government isn’t stupid and will not allow major shareholders to dump their shares, especially Temasek: its divestment will be perceived by other investors as a lack of confidence in the Chinese economy. Temasek may be allowed to divest a small percentage of its holdings and that’s about it. It has put itself in this mess and will be in for a roller coaster ride of the century.


Although Temasek has made some good investments, eg invested in Chinese banks at lower prices in the earlier part of last decade, these alone will not make up for others which are underwater.

If Temasek is a savvy investor, pigs can fly. I mean, should anyone even believe Temasek without the disclosure of relevant information on its investments?

It’s not just the public but even lawmakers don’t know where all our reserves are invested. Not only are Temasek’s concentrated investments extremely risky, there appears to be no due diligence conducted on smaller investments. Temasek’s make-or-break investment model doesn’t serve our long-term interest and Singaporeans are really better off without Temasek Holdings.

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