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February 16, 2009

Singapore: Sovereign fund losses won't drain reserves

Singapore's reserves will not be depleted by the losses suffered by its two sovereign wealth funds, Temasek and the Government of Singapore Investment Corp (GIC), Reuters quoted a government minister as saying in remarks published on Sunday.

Lim Hwee Hua, junior minister for finance, said that the decision by GIC, which manages central bank's reserves, to invest in "dangerous asset classes" was not a sudden move, but a slowly evolving strategy.

"Income from reserves is crucial. We cannot have income growth if we just leave the money in fixed deposits," the Straits Times quoted Lim as saying. Lim said that both state funds were long-term investors that should continue to deliver good long-term returns needed for the reserves to build up.

Temasek Holdings and GIC have been badly hit by the global market turmoil and by their recent investments in global banks such as Merrill Lynch, UBS and Citigroup . The net value of Temasek's fell by S$58 billion ($38.5 billion) to S$127 billion from April to November 30, the government disclosed on Tuesday.

Lim said that the key now is to put reserves in a balanced portfolio to diversify risks, the Straits Times quoted her a saying. The size of Singapore's total reserves has never been disclosed, although they include at least $200 billion in reported assets by its two sovereign wealth funds, savings from government's budget surpluses over the years and land sales. The central bank's foreign reserves stood at $167 billion as of Jan 31.

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