Investment losses a fabrication: Vivian
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SINGAPORE - The Republic's national reserves are "managed very, very carefully" assured Dr Vivian Balakrishnan, Minister for Community Development, Youth and Sports, yesterday, and Opposition claims to the contrary are "pure fabrication".
He made this point in his latest rebuttal to the Singapore Democratic Party's (SDP) claims, at their rallies, of investment losses by the Government of Singapore Investment Corporation (GIC) and Temasek Holdings.
Dr Balakrishnan reminded reporters after attending the Ulu Pandan Town Day celebrations that Finance Minister Tharman Shanmugaratnam, 54, had said during the last debate in Parliament that the investment portfolios of the two institutions were back at pre-crisis peaks.
At the local level, Dr Balakrishnan said that the overall performance of the Holland-Bukit Timah Town Council's investments, with their sinking funds, had been positive and generated a S$19-million profit with an annual rate of return of 2.5 per cent.
"In other words, there is no loss of national reserves. They (opposition candidates) are going around claiming losses on national reserves or losses on town council reserves," said Dr Balakrishnan.
"These are pure fabrications, and coming from someone like Mr Tan (Jee Say). I would have expected that he would have done his homework and bothered to check statistics and data which are available in the public domain."
Dr Balakrishnan, also rebutted SDP candidate Tan Jee Say's comment that spending S$60 billion of the national reserves to implement his economic ideas was "small change".
Mr Tan, a former senior civil servant, is part of the four-man opposition team challenging Dr Balakrishnan's team in the Holland-Bukit Timah Group Representation Constituency (GRC).
Dr Balakrishnan said yesterday that S$60 billion was "a big deal" and the reserves were Singapore's ammunition for a rainy day.
He noted that in difficult times, countries which did not have such firepower have been forced to borrow money, and this has often shaken confidence in the country.
If this happened to Singapore, the minister warned, the exchange rate would depreciate, inflation would rise and the cost of living would go up.
"So, this is a very, very serious matter and not something to be trivialised," said Dr Balakrishnan.
Mr Christopher de Souza, who is part of the PAP's team in the GRC, also responded to the SDP's Dr James Gomez's comments that the PAP's house visits were "old-style tactics".
Mr De Souza said: "There is nothing like personal touch ... You have to visit them in their homes and look into their homes to see whether or not they need help.
"I think the residents here want real MPs, not virtual MPs ... This commitment of personal service, not virtual service, is what we strongly believe must continue." -
This the same farker who would rather blow the YOG budget by 3 times to $400m than channel to better economic uses.
Tan Jee Say's $60b proposal makes sense since he talks about investing in education so that there are more teachers and doctors for Singapore. This is much better than having casinos where most of the jobs go to foreigners anyway. Would you have your child become a croupier or a teacher?
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in other words, our "profits" when the price of HDB flats went through the roof are also a fabrication...
okay... got it... thanks for clearing things up Viv...
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You mean they actually made gains from the Merrill Lynch bankruptcy?
They must be using university arithmetic to substantiate their claims.
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Vivian Balakrishnan said regarding the losses of GIC and Temasek, "These are pure fabrications, and coming from someone like Mr Tan (Jee Say). I would have expected that he would have done his homework and bothered to check statistics and data which are available in the public domain."
http://www.todayonline.com/Hotnews/EDC110501-0000284/Investment-losses-a-fabrication--Vivian
Because he posted the challenge of information being in the "public domain", I searched the internet and could only find the following most relevant report from GIC:
http://www.gic.com.sg/data/pdf/GIC_Report_2010.pdf
I refer to page 10 (I cannot paste the graphic). It is a graph of "Annualised Rolling 20-year rate of return of the Government's portfolio 1981-2010". I screen printed the graph, enlarged using photoshop and measure off using ruler exactly the 20-year return of "Nominal Rate of Return in US$ terms". I obtain the columns 1 and 2 of the following table:
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Year | 20-yr return| value if $1 twenty years ago| value if $1 on 1981|y2y return
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2001| 9.5| 6.166044144| 6.141612104|
2002| 9.5| 6.11727205 | 6.698412895| 9.07%
2003| 8.6| 5.215452092| 6.253457444| -6.64%
2004| 9.5| 6.11727205 | 8.031564522| 28.43%
2005| 9.7| 6.415496776| 9.223309194| 14.84%
2006| 8.5| 5.132570221| 8.079890882|-12.40%
2007| 7.8| 4.531353118| 7.811107632| -3.33%
2008| 7.7| 4.440882888| 8.38239563| 7.31%
2009| 5.7| 3.003092792| 6.206999423|-25.95%
2010| 7.1| 3.96512926 | 8.973966048| 44.58%
-------------------------------------------------------------------------------------------------Let me explain very carefully about the math because the column 5 is at best an approximation. Without more transparent information, it cannot be more accurate.
Column 3: computes the portfolio value if the portfolio was $1 twenty years ago. For example column 3 row 2 of 6.166 = FV(9.5%, 20 years, $0 PMT, and $1 PV). It means if the portfolio was $1 on 1981, the portfolio value would be $6.166 on 2001. Similarly if the portfolio was $1 on 1982, the portfolio value would be $6.11 on 2002.
Column 4: To obtain column 4 we need 2 assumptions:
a) annual year-on-year portfolio returns were 9.5% in years 1981, 1982, 1983, ...., 1989 each.
b) all cash injections into and cash withdrawals out of portfolio are ignored.
Hence to obtain 6.69, the math is 6.69 = 6.11 * 1.095, i.e. I compounded the missing 1981 return into the 6.11 figure. Similarly 6.25 = 5.215 * 1.095^2, i.e. I compouned the missing 1981 and 1982 returns into the 5.215 figure. Finally, 8.97 = 3.965 * 1.095^9
With this math, we managed to set up a base year of $1 on 1981. Now we are ready to compute the year-on-year return.Column 5: is the year on year return. It is easily computed using current year portfolio value divided by previous year portfolio value and minus 1. E.g. 9.07% = 6.69/6.14 - 1.
What can we infer?
Firstly how accurate is this model on the 2009 losses? It estimated 25.95% losses. I would say this is quite acccurate judging from the various news report. The news reported that the losses were less than Temasek's 31%.
Now with the leap of faith, suppose the model column 5 estimates are correct. We can see that
1) there were losses in years 2003, 2006 and 2007. These losses were not apparent in the GIC's chart.
2) Unlike the loss in 2003, the losses in 2006 and 2007 were not followed by a large recovery.
3) The loss in 2009 was the greatest in the last 10 years. While we can conveniently blame it on the subprime crisis, but financial crisis occurs all the time, why are the losses so much larger this time round?
4) There is a recovery in 2010. By finance industry ethics, GIC cannot include cash injections to compute return, hence I would assume the 44.58% return is due to actual growth in value and not due to cash injections. Indeed it has recovered to pre-crisis period of more than $8.38 in year 2008, but it is lower than $9.22 in year 2005.
Even if the estimates are not very accurate, this model shows that the current GIC portfolio value cannot be much higher than that in year 2005. Measured from year 2005, the portfolio probably did not earn more than 2% return annualized. Therefore the oppositions are probably correct. The GIC losses in 2009 were so great that they have not recovered respectably from year 2005 yet.The oppositions are correct, it means Vivian Balakrishnan is wrong. He should go and check the statistics and data in the public domain.
What we need for a more accurate analysis: we need year on year return of the GIC fund. With this data, we can derive the GIC chart easily. With the GIC chart, we cannot derive the year on year return without making assumptions which may not be accurate. Hence year on year return is the more important data.
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Thank you for your detailed analysis and exposing Vivian's bogus claim.
PAP is resorting to outright lies in this elections, we must be on our guard.
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i think my grand mother can get a better return.....
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These article concerns GIC, written in Mar 4 2010 when UBS price was share price was 16 SFR. Today's share price is around 17 SFR, which is below the 47.7 conversion price, so there's a loss.
UPDATE 1-GIC converts UBS notes, faces $5 bln paper loss
* UBS shares below 16 Swiss francs vs 47.7 franc conv price
* With 6.6 pct stake, GIC is biggest shareholder in UBS
* GIC among early sovereign funds to buy into Western banks (Adds detail on notes, background)
By Kevin Lim
SINGAPORE, March 5 (Reuters) - Singapore's biggest sovereign wealth fund, GIC, said it converted its UBS (UBSN.VX: Quote, Profile, Research, Stock Buzz) notes into ordinary shares, suffering a paper loss of about $5 billion.
The Government of Singapore Investment Corp [GIC.UL] had invested 11 billion Swiss francs ($10.22 billion) in mandatory convertible notes in UBS to support the Swiss bank during the financial crisis.
GIC did not provide more details, but a filing it made to the U.S. Securities and Exchange Commission early last month showed the original conversion price would be 47.7 Swiss francs, two-thirds more than UBS's last share price of 15.86 francs.
GIC had earned about 2 billion francs from a 9 percent coupon over the last two years, which partially compensated for the sharp erosion in UBS' share price.
"GIC confirms the conversion," a spokeswoman for the Singapore wealth fund said in response to Reuters' queries.
The filing had said GIC would exchange the mandatory convertible notes for 230.7 million ordinary UBS shares on March 5. GIC would have a stake of 6.6 percent in UBS after conversion, making it the Swiss bank's biggest shareholder.
GIC, led by Deputy Chairman Tony Tan, is becoming active again in global markets after its portfolio shrank by more than a fifth in its last financial year as it was hit by the financial crisis that drove down the value of its financial holdings.
A market recovery helped it recoup half its portfolio losses in March-September last year, and GIC recently profited from a well-timed sale of part of its Citigroup (C.N: Quote, Profile, Research, Stock Buzz) stake after it converted its preferred shares into stock.
GIC's recent investments have been diverse, ranging from the hotel industry and China property developer Longfor (0960.HK: Quote, Profile, Research, Stock Buzz) to a videogaming firm, but are in line with a recent statement that it is not pursuing geographical targets. (Editing by Ian Geoghegan)
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Article that talks about the realised losses by Temasek on Barclays and Merrill Lynch.
To be honest, I think Vivian is not correct by saying that the losses were fabrications. What he should have said was that "the losses on some investments were more than offset by gains on others on a portfolio basis." because if the investments were not made, the reserves would have been higher.
Temasek sold Barclays stake at loss
By Steve Slater and Saeed Azhar
LONDON/SINGAPORE (Reuters) - Singapore state investor Temasek sold its stake in British bank Barclays several months ago at a big loss, people familiar with the matter said on Wednesday.
After spending over 1 billion pounds on shares in Britain's second-biggest bank in the last two years, unlisted Temasek may have lost over 800 million pounds on the investment, according to calculations by Reuters.
Temasek's loss is in sharp contrast to Abu Dhabi which sold more than 11 percent of the bank's shares on Tuesday, making a $2.5 billion (1.5 billion pound) profit in just seven months.
Temasek sold its near 2 percent stake in December and January, two of the sources said. The sources asked not to be named due to the confidential nature of the investment.
"It's true that they sold in December/January," a person familiar with the deal told Reuters.
It is further evidence that Temasek is shifting away from banks, after it lost about $3 billion on an ill-timed investment in Merrill Lynch.
The fund's incoming CEO Charles Goodyear may cut its large holdings in banks to allocate money to energy and consumer sectors, analysts at Nomura said on Tuesday.
By 2:57 p.m. Barclays shares were down 4.4 percent at 261.5 pence. The European bank sector was down 2.4 percent.
Tuesday's placing of shares worth 3.5 billion pounds at 265p each had sated demand among investors and raised concern Abu Dhabi's sale marked the top of the recent rally, dealers said.
Investors are also expected to get the option to buy plenty more stock in the coming months as banks replenish capital or investors cash in on the strong recent run.
U.S. lenders Morgan Stanley, JPMorgan Chase and American Express have all said this week they plan to sell shares.
BANK EXIT
Temasek and Barclays declined to comment, and details of the price it sold at were not known.
Temasek paid 975 million pounds buying Barclays shares at 720 pence apiece in July 2007. It pledged to spend up to 200 million pounds last July to buy more shares at 282p each as part of bigger fundraising, but it never disclosed how many it bought. It would have spent about 90 million pounds to maintain its holding at around 2 percent, giving it 167 million shares.
Only investors with more than 3 percent need to disclose changes in their holdings.
Barclays shares traded between 136p and 167.8p in December and between 47.3p and 190.6p in January, when the shares crashed to a 24-year low on fears Britain's government would need to inject funds to boost its capital. The weighted average for the shares was 148p in December and 105p in January.
Based on the average of those prices, Temasek would have lost about 850 million pounds on its investment.
Barclays shares have soared more than five-fold from its January low after the regulator said its capital was adequate and business and sentiment across the sector improved.
Temasek owns stakes in a number of financial firms, and losses in several of them last year hit the value of its portfolio.
It invested over $5 billion in Merrill Lynch in late 2007 and took a hit of at least $3 billion when it sold its stake in Merrill's new parent Bank of America in the first quarter..
It still holds large stakes in banks such as DBS, Standard Chartered and India's ICICI.
(Editing by Erica Billingham and David Cowell)
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if the returns r in US$. we have lost much in exchange
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Originally posted by SevenEleven:
He noted that in difficult times, countries which did not have such firepower have been forced to borrow money, and this has often shaken confidence in the country.
If this happened to Singapore, the minister warned, the exchange rate would depreciate, inflation would rise and the cost of living would go up.
"So, this is a very, very serious matter and not something to be trivialised," said Dr Balakrishnan.
This is the biggest load of hogwash I've ever seen for a good while. I could have been forgiven for thinking this crap actually came from Kim Jong-Il.
As a case in point, can someone kindly enlighten me as to why Germany and Greece (two extreme examples of economies utilising the same currency and running on the same monetary poolicy) could co-exist with the same currency with such different environments with regard to inflation, cost of living and appreciation/depreciation of the Euro?
This indeed heralds the notion this regime is very much on its last legs - their delusion and disconnect from reality is so deep and severe it seems irreconcilable.
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Originally posted by walesa:
This is the biggest load of hogwash I've ever seen for a good while. I could have been forgiven for thinking this crap actually came from Kim Jong-Il.
As a case in point, can someone kindly enlighten me as to why Germany and Greece (two extreme examples of economies utilising the same currency and running on the same monetary poolicy) could co-exist with the same currency with such different environments with regard to inflation, cost of living and appreciation/depreciation of the Euro?
This indeed heralds the notion this regime is very much on its last legs - their delusion and disconnect from reality is so deep and severe it seems irreconcilable.
but north korean no chance to vote leh.... singaporean got chance but dunno is brain not working or hand not listening to the brain.. -
So are the losses a fabrication or not? Or is Vivian just being arrogant and misinformed? I thought candidates are supposed to be humble, not "tee kee". Does anyone know what "tee kee" means?? If a mistake was made should someone own up, rather than just sweep it beneath the rug or even worse plainly lie about it?
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Originally posted by I-like-flings(m):
but north korean no chance to vote leh.... singaporean got chance but dunno is brain not working or hand not listening to the brain..Well, we can only say so for those GRC that were contested in 1996, 2001 and 2006. (any earlier, there aren't many oppositions standing as candidate that were from beyond 1996)
Can't really blame those who didnt had a chance.
Good to see so many faces engaging in rallies. Especially the young ones.
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There is indeed losses after you guys posted the thread, but the minister still want to sweep the dust under the carpet.
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Guys, it's called "Negative Wealth Added" .
Not losses.
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Or Non-Positive Profits