Monday, November 10, 2008

Loss in the Singapore reserves

Dear Mr. Tan Kin Lian

I am getting worried about the financial crisis that Singapore is facing. MM said that Singapore has strong reserves. I am not sure if the reserves are still there.

How much has Singapore invested in the banks like UBS, Merrill Lynch, Citigroup and other banks? How much is Singapore guaranteeing in the IR project by Sands? Why should Singapore invest in the global banks when they are in deep trouble? Are we trying to bail them out?

REPLY

I do not know how much has been invested in these global banks and also the terms of the investments. Perhaps, someone can do some research and share the information here.

I recall that, in some cases, the investments were made in bonds, so the actual loss may not be that large - although the share price may have dropped a lot. In the case of Merrill Lynch, there was an arrangement for a compensation in case the share price dropped during a certain period. This helped to reduce the loss. In fact, it turned out to be profitable for us.

At the time of the investment, I personally thought that it was a good opportunity to invest in these banks at the knocked down price. I was not aware about the extent of the leverage and risks carried in their books. With the benefit of hindsight, we should not have have made these investments, but these facts were not known at that time - at least to the general public.

I do not recall any mention about guaranteeing the loan by Sands. But, I think that something should be done to keep the project from being a white elephant. The global financial crisis was unexpected when the project was approved two years ago. How the world has changed in a short time!

7 comments:

A Tan said...

Calculating the losses.

Use this as a reference point. The latest copy of the Economist said

"The portfolio losses sustained by the Gulf’s sovereign wealth funds, estimated a year ago to have accumulated some $1.5 trillion in overseas assets, may approach the $400 billion earned by the GCC from oil sales last year."

Do yrs sums.

Anonymous said...

Hi,

You don’t have to worry at all! The Singapore Reserves is managed by financial specialists who invested ‘with their eyes open’ in Banks like UBS, Merrill Lynch, Citigroup .....These specialists are definitely not ‘old or uneducated ‘.

Anonymous said...

This is not a bailout.
This is not a bailout.
This is not a bailout.

Anonymous said...

Why worry about Singapore reserves?

Just take care that you have enough reserves of your own. And do not invest in those structured products. Then you will realise that Singapore is a fine place to live.

Anonymous said...

Singapore has just sustained a heavy loss in ABC learning centre, a child care network in Australia and New Zealand. Singapore's Temasek Holdings is one of the biggest casualties in the collapse of ABC due to questionable management as reported by the Straits Times Nov 11 edition. Singapore bought into ABC for a sum of A$400 million. The shares of ABC were bought at A$7.30 and the share price dropped to A$0.54 cents just before the collapse. There is no more time for a long term excuse this time.

Anonymous said...

I wonder why we are paying millions of dollars for "talent" that made worse decisions than your average Joe?

Anonymous said...

Next step should be to have billion dollars "talent", maybe they can make better decisions.

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