Saturday, August 8, 2009

Temasek’s big blunder as BOA and Barclays rebound

The mouth-piece of the ruling party, the Straits Times has declared unilaterally today that the state Sovereign Wealth Fund, Temasek Holdings has “recouped a big part of its portfolio losses since a low point in March”. (read full article here)

In an lengthy editorial splashed on the front page, the Straits Times tried desperately to exonerate Temasek’s beleaguered CEO Ho Ching from any blame in the investment losses by hailing her decisions to purchase financial heavyweights such as India’s ICICI Bank, China Construction Bank and Standard Chartered Bank.

The Straits Times “findings” show that much of Temasek’s gains since the end of March have been driven by its exposure to financial firms:

“Take DBS Group Holdings, which has rallied 64.3 per cent during the four-month period. Temasek, which owns 27.8 per cent of the local lender, made a paper gain of more than $2 billion as a result.

Then there is Bank of China, which has surged 50.2 per cent and contributed around US$1.7 billion (S$2.4 billion) in gains to Temasek’s portfolio. The Singapore firm has a 13.8 per cent stake in the Chinese bank.”

However, the Straits Times is surprisingly muted on the share prices of Bank of America and Barclays which have since rebounded.

Temasek under Ho Ching bought shares in Merrill Lynch (later sold to Bank of America) and Barclays at a high last year before selling them at a low somewhere in mid-March this year leading to a catastrophic loss of a few billion dollars.

Temasek’s loss on BoA alone is estimated around US$4.6 billion, or roughly US$1,000 for every single Singaporean citizen. (Source: Asian Sentinel)

A simple calcuation shows that the stock value of Bank of America has increased by more than 200%.

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