Singapore’s Lee defends performance of Temasek, GIC in banks

December 5, 2008
Singapore Democrats

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Shamim Adam & Chen Shiyin
Bloomberg

Singapore’s Prime Minister Lee Hsien Loong defended the performance of the city’s state-owned investment companies after a plunge in the value of their stakes in Citigroup Inc., Merrill Lynch & Co. and other global banks.

Government of Singapore Investment Corp. and Temasek Holdings Pte, the nation’s two key investment companies that each manage more than $100 billion of assets, should be assessed on their overall portfolio returns instead of the performance of specific assets, he said.

“The situation looks a lot gloomier now than when they went in but these are long-term investments. It looks under water now, but the situation can change,” Lee told the Foreign Correspondents Association at a lunch today. “But if you are taking a long-term view, you have to be in on the downs as well as the ups.”

The two companies have invested more than $23 billion in Citigroup, UBS AG and other banks as financial-services companies seek funds after posting close to $1 trillion of writedowns and credit losses. A measure of financial companies on the MSCI World Index has dropped 59 percent this year, the worst among its 10 industry groups.

GIC, which invested $18 billion in UBS and Citigroup in the past year, has had a “respectable” performance over the last 20 years, said Lee, who’s deputy chairman of the government’s fund manager.

Merrill, Standard Chartered

GIC said in September it’s boosting investments in emerging markets, private equity and other asset classes to raise returns after cutting back stocks and holdings in developed nations.

Temasek is the biggest stakeholder in Merrill Lynch after a $5.9 billion investment in the past year. It’s also the biggest shareholder of banks including London-based Standard Chartered Plc and Singapore’s DBS Group Holdings Ltd., and holds stakes in Barclays Plc, India’s ICICI Bank and other lenders in Indonesia, South Korea and Pakistan.

Temasek, whose chief executive officer is Ho Ching, Lee’s wife, had an average 18 percent annual return on investment since its inception in 1974. GIC said in September that annual returns in the past 20 years averaged 7.8 percent in U.S. dollar terms, compared with 7 percent for the MSCI World Index.

Singapore, which entered a recession last quarter, may remain in one for a year, Lee said today. A recovery after the recession may take several years, he said.

The government, which brought forward its budget by a month to January, will implement measures announced then at once instead of waiting until the next financial year, which begins in April, he said. Still, any measures are not likely to solve the economic crisis immediately, Lee said.

“Come through”

The premier, who lifted a ban on casinos in 2005, said he’s confident the city’s two gaming resorts will “come through.” Singapore awarded licenses to Malaysia’s Genting Bhd., the world’s biggest casino-operator by market value, and billionaire Sheldon Adelson’s Las Vegas Sands Corp.

Las Vegas Sands, which owns the Venetian resorts in Las Vegas and Macau, said last month it has enough money to finish its Singapore casino without help from the city-state’s government after the company raised $2.1 billion. The stock has plunged 96 percent on concerns of rising debt and falling revenue.

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