Temasek Revelation

Source: Print ad in Straits Times, Friday 8 July 2011

 Singaporeans were allowed a rare peek at how Temasek was doing with the monopoly money today. Analysts like APS Asset Management generally agree that the rates of return achieved were "respectable", but not "particularly impressive". Said one, "It's not a figure you can be jubilant about." Or use to justify the salary increases over the years for the 400 staff, which used to be 92% Singaporean (2004), currently reduced to 66% (2011).

The total returns to shareholder was merely 4.6%, after dumping US$3.6 billion of shares in Bank of China and China Construction Bank (not included for the net profit computation). Temasek MD Nagi Hamiyeh said the divestment was part of the portfolio rebalancing, while reiterating in the same breath, "We are bullish on China in the long term." Why sell if the future looks promising? Another buy high, sell low stratagem like the Bank of America "divestment" in 2Q 2009? Temasek lost US$1 billion in that one deal (188.8 million BOA shares valued at US$13.7 each sold at an average US$8.67 per share).

The bragging rights seem to be about the Temasek portfolio hitting a record $193 billion. But where, may we ask, is the source of funds for the shopping spree?

According to the CIA Factbook release in 2010, Singapore has the 8th highest public debt to GDP ratio in the world after bankrupt states Zimbabwe (1st) and Greece (5th):

The CIA Factbook also notes "Singapore public debt consists largely of Singapore Government Securities (SGS) issued to assist the Central Provident Fund (CPF), which administers Singapore's defined contribution pension fund; special issues of SGS are held by the CPF, and are non-tradeable; the government has not borrowed to finance deficit expenditures since the 1980s." That's our CPF in the quote.

With the kind of lacklustre performance from Temasek, one can see why they are reluctant pay more than 2.5% on our CPF funds. But there's nothing to stop the powers on high to keep increasing the quantum of minimum sum frozen in the CPF accounts (just "revised" to $131,000 on 1 July), money which may generate better returns in the hands of more financial savvy fund managers. The CPF board says that the minimum sum revisions are to ensure that Singaporeans have sufficient savings to meet their healthcare expenses, nothing is mentioned about adding to the pool of play money for the Temasek guys.

Prettier picture in Temasek Review 2011 Annual Report

Singapore Notes