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29 May 2009

Singapore minister blames fall in local shares for state firm’s loss

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Temasek Holdings, the Singapore state investment agency, is likely to report a fall of about 30 percent in the value of its portfolio for the year to April, mainly caused by sliding share prices for the Singapore companies it controls, the Financial Times quoted the city-state's finance minister as telling parliament Thursday.

Tharman Shanmugaratnam, whose ministry is the sole Temasek shareholder, made the statement in defence of Temasek's recent decision to dispose of its 3 per cent stake in Bank of America, which has triggered a public outcry about the performance of the sovereign wealth fund.

Temasek is estimated to have lost between $2.3bn and $4.6bn from the BofA investment, although the finance minister did not disclose the precise amount.

The finance ministry revealed in February that Temasek's portfolio value had declined 31 per cent to S$127bn ($87.4bn) between April and November 2008. Shanmugaratnam said "the picture should not be fundamentally different" because stock markets at the end of March were similar to where they were in November.

"Of the S$58bn decline, S$32bn was attributable to the drop in market value of just the 10 largest publicly listed Temasek-linked companies in Singapore," which fell by an average of 41 per ent during the eight-month period, he said.

Temasek's main holdings in Singapore include DBS Bank, Singapore Airlines and Singapore Telecommunications.

Many critics have blamed Temasek's portfolio losses on the BofA deal and other investments in western financial groups, which the group made in the early stages of the global credit crisis that began in late 2007.

Several members of parliament from the ruling party suggested in parliamentary debates this week that Temasek should focus more on helping local companies to expand overseas instead of investing in foreign companies.

Shanmugaratnam said that since March 2003, Temasek's portfolio had grown by a net value S$56bn in spite of the losses posted in the last fiscal year. This means a return of slightly more than 15 percent a year during the period, compared with a 6 per cent annual return for global equity market indices.

"But while Temasek has performed better than many other large investors over this six-year market cycle, it is not realistic to expect it to outperform in every cycle. It is also not realistic to expect it to avoid losses on every individual investment," he said.

Temasek invested $5.9bn in Merrill Lynch starting in December 2007. The Merrill holding was converted into BofA shares when the groups merged in January.


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