Singapore - GIC, Temasek & MAS 02 (Sep 09 - Jul 11)

[winston]

Singapore's GIC cuts exposure to West over debt worries

* Sees hit to U.S. Treasuries if rating cut as short term
* Concerned long-term about U.S., Europe budget deficits
* Cut exposure to U.S., euro zone in last financial year
* Does not see systemic threat in China from bad debts (Adds details on Singapore's U.S. Treasury holdings, edits)

By Kevin Lim and Saeed Azhar

SINGAPORE, July 26 (Reuters) - Long-term concerns about the U.S. and European fiscal deficits prompted Singapore wealth fund GIC to shift funds out of developed share markets but it still sees U.S. Treasuries as a relatively safe investment.

The sovereign wealth fund, the world's eighth-largest with an estimated $300 billion in assets, said it expected only a short-term impact on U.S. Treasuries if the political deadlock in Washington over the debt limit leads to a cut in the country's top-notch AAA credit rating.

The more important issue is how the United States tackles the budget deficit, which is expected to exceed $1 trillion in the fiscal year to the end of September, GIC Group Chief Investment Officer Ng Kok Song suggested.

"I think what matters in the longer term is whether either the current negotiations... are able to come to some agreement," Ng said.

"Or if they can't do it now, whether the presidential elections in 2012 will then be able to put in place a longer term plan," he said.

GIC, or Government of Singapore Investment Corp, cut its holdings of shares in developed markets to 34 percent of its portfolio from 41 percent in the fiscal year to the end of March, its annual report shows.

Ng's comments were provided in notes from GIC on Tuesday after the fund briefed local media on Monday about its annual performance to the end of March. GIC rarely briefs the international media on its investment performance.

After weeks of rancorous talks, finger-pointing and political point-scoring, Republicans and Democrats in Washington are far apart on a deal to reduce the U.S. budget deficit, which would clear the way for Congress to raise its $14.3 trillion borrowing limit.

The U.S. Treasury has said that if the borrowing limit is not increased by Aug. 2, the country could run out of money to pay its bills. Ratings agencies are poised to downgrade the U.S. top-ratings of AAA if the talks fail to produce a credible plan.

"There could be some short-term effects," Ng said, if the U.S.'s top-level AAA credit rating is cut. "But fundamentally, (U.S. 10-year yield below 3 percent) lets us feel U.S. Treasury bonds are still in global terms the most liquid and safe asset ... It's a relative thing, but the U.S. is not in a Greek kind of situation."

GIC and other Singapore government entities hold some $57 billion in U.S. Treasuries, Singapore's Oversea-Chinese Banking Corp said in research note last week.

GIC's annual report showed that while it reduced its exposure to developed markets, it increased its investment emerging market equities to 15 percent from 10 percent.

Its overall exposure to U.S. assets fell to 33 percent from 36 percent, while its exposure to the euro zone dropped to 12 percent from 16 percent.

"Outside the emerging economies, it's a case of choosing between three very unpleasant outlooks in Europe, the U.S. and Japan," the Business Times newspaper quoted Ng as saying at a briefing for local media on Monday.

EMERGING MARKETS

Ng said six markets -- China, Brazil, Taiwan, Korea, India and South Africa -- accounted for almost three-quarters of GIC's investments in emerging market public equities.

On China, Ng said potential losses from bad debts at Chinese banks were unlikely to overwhelm the country's banking system.

"The Chinese government has the financial wherewithal, if necessary, to recapitalise the banks, so I don't think you're going to have a systemic problem such as what we saw in Europe," the Business Times quoted him as saying.

Turning to Citigroup and UBS , which GIC helped rescue during the global financial crisis, Ng told the Business Times that the Singapore fund's long-term view on the two lenders has not changed despite the introduction of higher capital requirements that are likely to reduce profitability.

GIC owns about 6.4 percent of UBS and 3.86 percent of Citigroup even after selling half its stake in the U.S. bank in 2009.

GIC achieved a nominal annualised rate of return of 6.3 percent in the five years to March 31, the annual report said. The annual return, in U.S. dollar terms, was 7.4 percent over 10 years and 7.2 percent over 20 years.

GIC had previously only reported its annualised returns over 20 years.

After taking into account global inflation, GIC's annual real rate of return over 20 years rose to 3.9 percent at end-March 2011 from 3.8 percent at the end of March 2010.

http://www.reuters.com/article/2011/07/ ... 8920110726

[LenaHuat]

Read the ST or the BT. Now we know the silly things that President Ong TC wanted the Accountant-General to do.
I had always think that OTC was the wrong guy for the post.

Read the MOF's FAQ on its website, it is illuminating.

[kennynah]

thanks L

i can access this teaser...

went over to MOF's website... no patience to pour over their links to find out what they disclosed...JUST LAST WEEK, apparently
********

Singapore
Home > Breaking News > Singapore > Story
Jul 26, 2011
Ministry website offers answers on reserves and the presidency

WEBSITE UPDATE

To access the Ministry of Finance's FAQ, log on to http://www.mof.gov.sg and click on the FAQ tab.

WHAT information does the president have about the reserves? And did the Government provide former President Ong Teng Cheong with enough information to protect the reserves?

The answers to these and other pointed questions are now on the Ministry of Finance's (MOF) website, which was updated extensively last week.

Its frequently asked questions (FAQs) section has additional information on the reserves and a new section that explains the role of the president.

The MOF uses the updated site to address what it considers 'misperceptions' under the section entitled 'What is the President's role in safeguarding the reserves'.

It says, for example, that 'a misperception is that the late President Ong had not been provided with sufficient information for him to effectively protect the past reserves'.

'In fact, he was given full access to the information of the reserves during his term of office. This information included the value of all the Government's financial assets, as well as a listing of physical assets, such as buildings and land.'

To access the Ministry of Finance's FAQ, log on to the MOF website. and click on the FAQ tab.

[LenaHuat]

Read what TKL has posted on his FB:

Long term yield on GIC portfolio

GIC reported a 10 year and 20 year yield on their portfolio of 7.4% and 7.2% respectively in USD. I wonder what the yield would have been, if converted to SGD. We know that the USD has depreciated significantly during this period.

I am encouraged by this statement: "GIC's real rate of return in excess of global inflation over the past 20 years -- its main benchmark -- was 3.9 percent as at end-March 2011, up from 3.8 percent at end-March 2010."

However, it might be better if the yield is converted to SGD and the real return is computed net of inflation in Singapore.

Another dense fellow. MAS's Menon's press conference briefs (available on MAS website) and his explanation during the press conference were so clear.

[kennynah]

what puzzles me is that we are looking to the next president to do what i expect MPs to perform, querying the performances of GIC and TH. but given our political makeup, i must be dreaming...

[LenaHuat]

Hi K
It takes truly good minds to ask the right questions about GIC and TH. I think TJS and CSMao can.
As I had previously written, I do not support too much transparency of GIC in the public domain.

[kennynah]

indeed L

good minds, however, do not mean clean hands, which we cannot possibly expect of pap affiliated MPs. common sense will attest to this persuasion.

but i am heart warmed that we have Singaporeans like yourself, who give me hope that Singapore will change from its current state of affairs to become a more civil, warm, pleasant and articulated society. this is my hope and no doubt yours too.

[LenaHuat]

Hi K
Me, paiseh But you truly wrote an eloquent piece. It shows that we do love this place and wish it well.
It shows that all of us here are 'fighters' too.

[winston]

Hmm... maybe i need to change my glasses. Some "experts" can see 20 years into the future while I cant even see 20 weeks.

Janus Welcomes GIC's Adherence to a 20-year Investment Time Horizon

The Government of Singapore Investment Corporation (GIC), has reiterated the 20-year period as the most suitable time horizon to measure asset performance. Janus Corporate Solutions, a leading Singapore company incorporation agency and the parent of www.GuideMeSingapore.com, welcomes the affirmation that was published in the recently released 2010/2011 Report on the Management of the Government's Portfolio. Janus also accepts the strategy as a way by which Singapore will maximize its returns and consequently boost the economy's competitiveness.

As a key national reserves manager, the GIC has steadily worked towards achieving high long-term returns and growing Singapore's reserves by making prudent investments in assets that have good value and strong long-term growth potential. GuideMeSingapore.com's analysis shows that the GIC invests in liquid assets such as infrastructure and natural resources as well as illiquid ones such as real estate and private equity. Therefore, it is only pragmatic that assets be accorded a long-term time horizon to realize their potential and correspondingly, produce better returns over time.

Commenting on the strategy, Ms. Jacqueline Low, the Director of Janus Corporate Solutions said, "Building up reserves takes time and judiciously investing them in the right assets is key to a country as small as Singapore. A country that has a healthy pool of reserves secures two things. In the short term, it ensures a steady flow of income that enables a country as small as Singapore to tide challenging economic times.

In the long term, it demonstrates an economy's ability to keep up a healthy and lasting track record. This is therefore conducive for business and gives entrepreneurs and investors ample reason to form a company in Singapore. The presence of a more robust and colorful business landscape in turn ensures that future generations in Singapore have a stronger foundation to build up and transform Singapore's economic landscape."

Further analysis by GuideMeSingapore.com shows that a 20-year period is more pragmatic for GIC investments as it is a more reliable grounding to make or sell assets. A 20-year time horizon includes many business cycles and its ups and downs. However, it also allows decision makers to look beyond the minutiae of various and inevitable short-term fluctuations that happen on a year-to-year basis.

Therefore, contrary to the view that 20 years will allow fund managers to mask bad asset performance, having a long-term approach allows fund managers to avoid force-buying or force-selling based on short term returns. Additionally, a long-term approach takes global inflation out of the equation, allowing the GIC to calculate the real rate of returns over 20 years.

The GIC's 20-year real rate of return was 3.8% in March 2010. This year, the GIC's 20-year annualised real rate of return has improved to 3.9% due to an ongoing recovery of the equity markets.

"GIC's announcement to continue with the 20-year investment time horizon comes on the back of International Enterprise Singapore's recent announcement to groom as many as 1,000 high-potential Singapore companies to better compete in the global arena. Altogether, they reflect Singapore's prudent jurisdiction and a resounding commitment to secure the national and economic well-being for current and future generations," Ms. Low added.

http://www.sfgate.com/cgi-bin/article.c ... 680827.DTL

[iam802]

I am sure soros does not use a 20 year timeframe.

It is either one is right or one is wrong. Do not need 20 years.

So, i wonder
1. What is their returns for last 5, 10 years
2. Is it going to be challenging for the next 5, 10 years; hence choose a 20 years timeframe instead?