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Singapore
sees value of bank investments
Gillian Wong
Associated Press
22 Jan
08
http://www.chron.com/disp/story.mpl/ap/fn/5471660.html
Singapore's
two state investment agencies rigorously studied the risks
involved in investing billions of dollars in troubled Western
financial institutions before deciding the deals would be
valuable, the government said Monday.
The state-run
Temasek Holdings and Government of Singapore Investment
Corporation, or GIC, were approached by cash-strapped banks such
as UBS AG, Merrill Lynch &Co. and Citigroup Inc. for capital
infusions amid large write-downs of their assets, the
city-state's Finance Minister Tharman Shanmugaratnam told
Parliament.
Temasek and the GIC "assessed the
proposals rigorously" before concluding "that these
were good, long-term investments and valuable additions to their
overall portfolios," Tharman said.
"They
considered each of the banks as having a strong business
franchise, and good long-term growth potential across multiple
businesses and multiple locations," he said, responding to a
parliamentarian's question on the rationale behind the recent
deals.
Temasek and GIC, which each have assets of more
than $100 billion according to their Web sites, are among the
world's largest so-called sovereign wealth funds.
Such
funds from the Middle East, Singapore and China have been
investing in major Western financial institutions that have lost
billions of dollars on bad bets in the U.S. mortgage market.
Rising delinquencies and defaults among mortgages have forced
banks to write down the value of bonds and debt backed by the
troubled loans.
GIC invested $9.75 billion in UBS, the
Swiss bank said in December. Later that month, Merrill Lynch said
Temasek had bought a stake of less than 10 percent for at least
$4.4 billion and up to $5 billion.
Last week, Citigroup
said it would receive $6.9 billion from GIC for a 4 percent stake
in the U.S. Bank.
Tharman acknowledged that the
investments were large and involved risks, but said it was not
the government's position to second-guess the individual deals
struck by the two investment agencies.
The government says
that the GIC and Temasek make investment decisions independent of
the state. The two funds operate on an understanding with the
government as to its overall risk tolerance.
"There
will be some downside risks. It is up to GIC and Temasek to
assess this risk and decide if it's acceptable. Their
responsibility is to accept prudent risks in order to earn good
returns on their overall portfolio," Tharman said, stressing
that the government is keen to avoid influencing the two funds'
decisions.
Officials from Temasek Holdings and the GIC
could not be reached for comment Monday.
Temasek holds
stakes in many of the city-state's largest companies including
Singapore Airlines and Singapore Telecommunications. Most of its
investments are in Asia.
The GIC was established in 1981
to manage Singapore's foreign reserves.
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