http://singazen.com/singapore_inc/temasek content transferred

Temasek has been expanding overseas, but has encountered problems in Thailand (see previous article), Indonesia where it was accused of violating rules on telecom company % shareholdings, and in China over the same issue relating to banks though the issue was handled by the Chinese government in a more amicable way; its attempt to invest in China Eastern Airline is also meeting some opposition and is as yet unresolved.

Temasek became the largest shareholder of Standard Chartered Bank by buying the stake of the Khoo Teck Puat estate, then in some legal jeapody because, when lawyers went through his accounts for probate, he was found have violated some stock listing rules in relation to his shareholdings in a number of SGX companies (not SCB itself). Most recently it made a capital injection into Merril Lynch which suffered from major losses in mortgage related securities. In each case, Temasek was able to make use of an unanticipated opportunity in a timely fashion because of its liquidity.

Temasek had repeated run-ins with foreign journalists over the fact that its CEO happens to be the wife of the Prime Minister/daughter in law of LKY: any suggestion of nepotism, however carefully couched (such as the Financial times article "Sovereign funds try to put on an acceptable face" three months ago) would bring on threats of lawsuits and usually results in quick retraction with payment of damages.

The arrival of Ho Ching at Temasek did mark a drastic change: previously it merely acted as a holding company, whose main influence on its companies is through the selection of their board members and senior management officials, now Temasek actively seeks out international investment opportunities on its own. Whereas companies like DBS and Singtel had previously ventured overseas, they are constrained by corporate prudence and shareholder oversight requirements applicable to publicly listed companies, whereas Temasek is not and could act with greater freedom.

Temasek and GIC, together with midde east and mainland china government investment funds, came to the rescue of US investment banks in trouble because of their losses and asset freezes resulting from the mortgage problems - like Bear Stearns though less seriously, they were unable to raise cash from the mortgage backed bonds they hold and needed capital injections. This has added urgency to their need to show greater transparency, to convince the market that they operate stricly according to commercial, not political, considerations.

I have long thought (and said so during a lunch a few years ago with Vivian Balakrishnan, when he sought feedback from longterm PRs about what factors attract PRs to stay on - I had to say quite honestly that my case probably was fairly unique so has little relevance to others) that the two organizations should operate more like mutual funds or unit trusts with all citizens as shareholders, who get annual reports about the performances as well as regular dividends. I have heard vague comments of uncertain origin that revealing the details would put Singapore at a commercial disadvantage, even mentioning attacks on the currency (like George Soros speculating successfully against the UK pound - but not long after he lost when the ruble crashed), though the exact connection escapes me. However, I think the real consideration is the general Singapore government philosophy of not engendering an attitude of entitlement among the people; yet, this is all the more reason to bring in such revelations before being pressured into doing it,whether from internal or external reasons - doing something at your own choosing means you can choose what, how much and which way.

added on 27/4/08

the sunday times carried an article on this; the UBS and Barclay share buys have clearly suffered a paper loss; the merryl lynch and citicorp investments were convertible bonds, one with no deadline, one with compulsory conversion in 2 years; I assume the conversion prices are both considerably higher than the current market price, and the force conversion would be out of money unless a quick recovery occurs