Monday, December 10, 2007

Breaking News : GIC buys stake in UBS!!!!!

While you were so small minded and whining about that 2 cent increase in bus fare, that $2 increase in polyclinic fees and the extra few dollars you have to fork out per day as you go through the ERP..........our GIC has has purchased a 9% stake in UBS for a whopping US$11.5B!!!!
.
See how useful your CPF money is. I'm so glad that my CPF money is used to help prop up the world's banking system. It looks like this subprime crisis is going to get defused by sovereign funds recapitalising banks by buying significant stakes in them. Of course those Abu Dhabi fellers who bought a piece of Citibank had it easy, they got most of it (the money) by allowing Chevron, Exxon etc to drill holes in their country. Our CPF money involves alot more sweat & labor.

Don't worry too much about it. You will get your 3.5% return as your money is used to purchase a stake in Europe's biggest bank. I was looking to buy UBS or Citibank with my 13th month pay. I think I'll settle for Citibank since GIC already owns a piece of UBS.

Looking through the numbers in the most pessimistic case, many US brokerages/banks might lose their entire book value if their level 3 assets are revalued. Level 3 are illiquid assets which accountants cannot really value properly. I comb through alot of data and decided that the whole situation is going to be very risky and potentially rewarding. Citibank of course is not going to collapse but by the time all the mess is sorted out it is uncertain if its stock will double or halved. I figured that if I were to play it safe, I should split my money into 3-5 instalments and buy gradually as the saga unfold averaging across a 9 month period. This is what I decided to do with the money to minimise the risk as I have worked hard for the money I intend to invest.
....GIC is going to put US$11.5B at one go, that is 10% of our reserves. They are doing something I wouldn't do with my 13th month pay.....you got to hand it to the guys in GIC, they certainly treat Singaporeans' money as carefully as they would treat their own.


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http://www.bloomberg.com/apps/news?pid=20601087&sid=auWIldY77wRU&refer=home
UBS to Sell Stakes After $10 Billion in Writedowns (Update2)
By Elena Logutenkova

Dec. 10 (Bloomberg) -- UBS AG will write down U.S. subprime mortgage investments by $10 billion, the biggest such loss by any European bank, and replenish capital by selling stakes to investors in Singapore and the Middle East.
Europe's largest bank by assets plans to raise 13 billion francs ($11.5 billion) selling bonds convertible into shares to Government of Singapore Investment Corporation Pte. and an unidentified Middle Eastern investor, Zurich-based UBS said in a statement today.
UBS scrapped a forecast for a fourth-quarter profit and may post a full-year loss, the company said. The collapse of the U.S. subprime mortgage market has led to about $76 billion of losses and markdowns at securities firms and banks this year. UBS follows Citigroup Inc., the largest U.S. bank, in taking on strategic investors to bolster capital.
``UBS was quite clever this time to couple some extremely bad news with some good news,'' said Dieter Winet, who helps manage about $50 billion including UBS shares at Swisscanto Asset Management. ``It's positive that capital is placed in firm hands. This will help restore trust in private banking and asset management and help UBS write new business.''
UBS shares fell as much as 3.4 percent, and were down 1.2 francs, or 2.1 percent, to 56 francs by 9:04 a.m. in Zurich trading. The shares have fallen 23 percent over the past 12 months, erasing more than 25 billion francs of the bank's market capitalization.
Citigroup, Fortis
Singapore's GIC, which oversees the island nation's foreign reserves, will invest 11 billion francs in UBS for a 9 percent stake. The Middle East investor will put in 2 billion francs.
New York-based Citigroup announced last month a $7.5 billion cash infusion from Abu Dhabi after record mortgage losses wiped out almost half its market value. Ping An Insurance (Group) Co., China's second-largest insurer, bought a 4.18 percent stake in Fortis for 1.81 billion euros ($2.7 billion).
``Because there's a lot of liquidity in those countries and those sovereign wealth funds, they'll be looking for investment opportunities,'' said Masafumi Oshiden, a Tokyo-based fund manager at BlackRock Japan Co., whose parent company holds $1.1 trillion in assets. ``The valuations have come down a lot.''
UBS also plans to sell 36.4 million treasury shares that it previously intended to cancel, raising about 2 billion francs, and proposed replacing the 2007 cash dividend with stock, boosting capital by 4.4 billion francs. The convertible bond sale and dividend replacement must be approved by an extraordinary shareholders meeting in mid-February, the bank said.
`More Aggressive'
UBS said it plans to raise a total of 19.4 billion francs through all the measures, which will improve its so-called Tier 1 ratio to more than 12 percent from 10.6 percent on Sept. 30.
The bank posted its first loss in almost five years in the third quarter after the subprime contagion led to about $4.66 billion in markdowns on fixed-income securities and leveraged loans.
``The industry has been moving to more aggressive markdown rates'' on subprime-related assets, Kinner Lakhani, a London- based analyst at ABN Amro Holding NV with a ``hold'' rating on UBS shares, said before today's release. UBS's previous writedowns had been ``well below industry benchmarks.''
The bank's losses already cost the jobs of Chief Executive Officer Peter Wuffli, his finance chief Clive Standish and investment-banking head Huw Jenkins.
``We believe that we have made sufficient value adjustments now,'' Chairman Marcel Ospel told Swiss radio DRS. ``I find it very difficult to imagine even worse consequences.''
`Maximum Clarity'
Ospel said neither he nor the board of directors considered his resignation. The bank has completed most of the 1,500 job cuts announced earlier this year at the securities unit and will finish the rest by the end of the year, he said.
Marcel Rohner, who was named CEO in July, CFO Marco Suter and Chief Risk Officer Joseph Scoby are scheduled to give analysts and investors a business update in London tomorrow.
``In the last several quarters, continued speculation about the ultimate value of our subprime holdings -- which remains unknowable -- has been distracting,'' Rohner said in the statement. ``These writedowns will create maximum clarity on this issue and will have the effect of substantially eliminating speculation.''
The bank was expected to write down about 2.6 billion francs in the fourth quarter, according to the average estimate of five analysts who published forecasts over the past month.
Credit-default swaps tied to the Zurich-based bank's debt rose 1 basis point to 57 basis points, according to Deutsche Bank AG. The cost of credit-default swaps, used to speculate on the ability of companies to pay their debts, rise as perceptions of credit quality worsen.
UBS said on Oct. 30 that it had $16.8 billion invested directly in residential mortgage-backed securities at the end of the quarter. It also had $1.8 billion of collateralized debt obligations, bonds created by repackaging other debt securities, as well as $20.2 billion of so-called super senior securities, or AAA-rated structured debt that gets paid back ahead of other similarly rated bonds in case of a default.
To contact the reporter on this story: Elena Logutenkova in Frankfurt at elogutenkova@bloomberg.net Last Updated: December 10, 2007 03:22 EST

38 comments:

Anonymous said...

This is scary - who is auditing GIC? 10% of our reserves are in this 'game"?

Anonymous said...

No one audits the GIC. Papa Lee is untouchable ok!

Anonymous said...

I thought Papa Lee mentioned that you cannot touch the reserves leh....meant to weather the storm one...that's what that Chee Bye Papa Lee keeps on saying one...

how come lend to UBS to weather their storm?
Singapore's reserve is Family Lee's treasure chest, huh?

Anonymous said...

$14 bil?? While the Swiss govt is not bailing out their bank, the Singapore Govt is bailing out the Swiss bank? While our old folks are left in the lurch with $290 per month, and the govt is stingly holding the purse, not paying an annuity for our old folks above 80 years old? Something is screwed up in this place!!

Anonymous said...

Maybe, LKY is not bailing out the bank, he is trying to avoid his bank accounts in UBS becoming zero while the bank collapse ...

To him, what is more important? your CPF or his hard earned monies that he squeezed from fellow countrymen all these years ...

At 83, he can't start all over again.

Anonymous said...

The chances of a higher than 3.5% return your CPF money is in doubt. Believe in theory folks.

Anonymous said...

Papa Lee is an underling of the money masters - the big banks, hedge funds - of the West.

Tis why in June this year he paid a whopping S$1.5B for a small 4 or 5-storey building in London belonging to Merrill Lynch.

Now he invests S$16.6B (US$11.5B) in a failing Swiss bank UBS.

He throws money like he owns it all. The so-called national reserves of Singapore is different from those of other countries. This is because probably up to 70 to 80% of the reserves are people's CPF savings.

When GIC and Temasek lose big money, what will happen to people's CPF savings?

Is there a recourse via an international court of justice - without going to the local courts - to address this potential time bomb : the breach of trust by PAP/CPF as the custodian/bank of people's life savings?

Any lawyers out there like to advise on this?

Kenneth said...

Ngiam Tong Dow wrote in his now popular book "Mandarin and the Making of Public Policy Reflections" that the US paid the Singapore government S$1 billion after the 97/98 Asian financial crisis.

For what? Methinks for not intervening in the local stock market bloodbath during the crisis - especially when Hongkong asked PAP to collaborate on fighting off the attacks from the big speculators.

Obediently PAP followed instead IMF advice to allow "market forces" to play themselves out - only to result in a horrendous 60% drop in STI and the collapse of many local businesses.

About a month before the recent Oct subprime crisis, our PAP ministers started talking about a coming stock market crash. Then it really happened, even though the subprime problem had been simmering in the background for many years.

Next time I will follow closely such coordinated talk by PAP ministers; they looked well informed by the money masters as to when the latter are going to act on certain things. That way the the personal investments of PAP politicians are safe, as they have time to pull out. There is a reward for being obedience to the money masters.

The financial world is a chess board of the money masters and LKY kowtows to them out of timidity.

I only see China-Hongkong now up to par in this game, a lesson learnt from the Asian Crisis and a battle well fought, sending the money masters scurrying away and licking their wounds.

The future is made up of such a covert global battle which nonetheless affects the lives of the ordinary people in a very serious degree.

LKY paying $11.6 billion to prop up UBS is a very good case in point.

Anonymous said...

Your papa Harry has lost the plot.
Him and his mini me son.
Good article Lucky Tan.

Anonymous said...

erm, i have a question.

GIC is the arm created to invest in our foreign reserves, right?

If so, its not actually CPF money right?

Foreign reserves comes from trade surpluses and what else?

so can i say that GIC's money is actually the govt's money...and not really our money?

and i think to invest in UBS is a smart move. if you control the banks, you control power.

i dunno - if i'm wrong on any of the points above, please correct me.

aygee

Anonymous said...

i visited the GIC website. this is how they explained themselves.

If you look at their mission objectives, then i think the investment in UBS seems to be in line.

aygee

--------

GIC is a global investment management company established in 1981 to manage Singapore's foreign reserves. With a network of eight offices in key financial capitals around the world, GIC invests internationally in equities, fixed income, foreign exchange, commodities, money markets, alternative investments, real estate and private equity.

Since our inception, we have grown from managing a few billion dollars, to well above US$100 billion today. With a portfolio this size, we are now amongst the world's largest fund management companies.

The group strives to achieve good long-term returns on assets under our management, to preserve and enhance Singapore's reserves.

Anonymous said...

Anon 1:37,

This link should half-answer your question : SINGAPORE International Reserves and Foreign Currency Liquidity

It is a half-answer because even the IMF is not being told by PAP how much of that Singapore's foreign reserves are composed of social security - this is none other than the CPF savings of the people!

Just read the small print below the title on that page : "Information to be disclosed by the monetary authorities and other central government, excluding social security".

Years back we used to know for a fact, that some 70% of the our national reserves is made up of CPF savings. What is the composition now, anyone care to enlighten?

Anyway without adequate transparency and accountability of its usage by GIC and Temasek - never mind that elected President was specifically set up to superintend the national reserves - what do you think is the situation?

Why would the present President want to risk his post?

After all, when the late President Ong - a former cabinet minister to boot - revealed just before he stepped down that he was having a problem with the accounting of the national reserves, LKY straightaway reacted aggressively that President Ong had not power to talk about that.

Only fear could have inspired that irrationality; and your guess is as good as mine what that fear is all about.

Thamby Daud & Hock said...

pipe down and relak.the good nature auntie choo, of the national paparazzi, already assured us that the money is invested with good intentions. she said, if the investment performs well, you may get a cut through economic restructuring shares.

she also said, the garmen has SERIOUS MONEY in its foreign coffers, on which the garmen makes VERY PRUDENT investments and we can SLEEP EASY building on the DREAM of ANG POWS to come

i believe her :)

Anonymous said...

Dear aygee,

Don't be silly. There's no such thing as "the government's money". If it is public funds, it belongs to the public, ie. you and me. In a democratic modern economy, whomever forms the government would just be playing the role of a caretaker elected by the people to look after these public assets.

The trouble with many Singaporeans is that they are so dumb and ignorant they don't even realize that the PAP government has been stealing from them. Every cent that GIC or Temasek squanders come from the people of Singapore --- they are not squandering "the government's money", they are squandering your money.

Anonymous said...

I figure the late President Ong Teng Cheong smells a rat about the smelly business Papa Lee and his cahoot are conducting many years ago...converting Singapore reserve to be Family business. So GIC headed by LKY and son, Temasek by daughter-in-law...
You think it's a good buy? Maybe they forgot to tell you that you can sit on that useless piece of paper for 80 years---by which time you can start drawing $290 per month (corporal pay, Ok), you want Lao Lee's pay, you got to suck harder.

Anonymous said...

Read this article by Financial Times:
"Singapore’s wealth fund flattered by imitation".

It says that China, South Korea and Japan are trying to emulate GIC apparently because GIC's assets grew from around US$5bn in 1981 an estimated $140bn now.

See how misleading an image GIC has created to the world, when those Temasek assets in large part are in fact made up of CPF savings of the people. So of course it had grown tremendously over the years but certainly not in terms of GIC performance in investment.

The article also reported that GIC revealed for the first time that it had achieved an average return of 9.5 per cent. But who is to know whether this figure is true or not since there is no external auditing?

Whether the UBS investment now is a calculated or a desperate gamble to make up hidden losses, nobody can tell for sure.

But indications are that it is the latter; otherwise why so secretive about opening the books to external independent auditors or even to let the elected President know what is going on.

Does President Nathan knows better when President Ong could not?

Anonymous said...

ok..some fair arguments thrown around.

but would u agree that "money is power"? we're a tiny nation with nothing much else except our people and our reserves.

perhaps the GIC has been using its vast amount of reserves to gain some of "influence" in the bigger global economy? we now have seen how we can easily become the largest shareholder of one of the most powerful banks in the world.

maybe this investment into UBS is a way in which we gain some influence and control into the bigger global economy?

much like how Li Ka Shing manipulates the global telco industry through his investments?

aygee

Anonymous said...

anyways, whatever it is, i just hope that GIC comes up with a hip hop rap to explain some of its dealings. maybe i'll understand and appreciate much more...

aygee

Anonymous said...

President Nathan knows how to pose in front of cameras, smile and wave. that i can see with my eyes.
but i also heard that he knew how to be a good japanese translator and now makes roti pratas too.
LKY created a President and announced to the world that the President is to safeguard the reserves & now you can sleep safe and sound!
More like a smokescreen.

Anonymous said...

aygee,

you are quite naive. UBS is even nowhere near Goldman Sachs or Merrill Lynch. Want to boast to the world that you have deep pockets, try those big guys and see if US big brother allows you.

If hip-hop rap is the kind of satisfaction you need from PAP, go back to your barracks and serve NS for life.

Anonymous said...

Before we can even say that the UBS deal is good or not, we have to ask what is exactly going on with our national reserves?

That's the crux of the issue.

All we know are what PAP wants us to hear because GIC which controls the money does not allow external auditors; there is no way to authenticate what GIC claims.

I hate to think about this but for all you know there is not much left after the multi-billion dollars losses - Micropolis, SIP, Shin Corp, Optus - made by Temasek, GIC and God knows what other investment arms.

If you can't even talk about securing your own national reserves, how can you talk about this country "gaining some influence and control into the bigger global economy" as aygee just quite innocently posited.

More likely GIC is just dicing with billions of our hard-earned CPF savings and national reserves proper to salvage the rich countries in the hope the deal will pan out.

It is rather strange that EC - which made up of so many large economies capable of bailing out UBS - would instead esteem so highly little Singapore and its investment arm GIC to offer it such a significant stake.

I would like to be proved wrong in my assessment seriously for then everyone future would be more secured.

Anonymous said...

Just to provide some perspective, when UOB acquired OUB a few years ago, it paid $5.7 billion. $11.5 billion is enough to acquire two banks the size of OUB.

It's amazing that the government will just throw a sum like this at a foreign bank and at the same time laments that local banks are too small to compete globally.

Anonymous said...

Dear aygee,

Li Ka Shing invests his own money. If he makes a wrong bet, it is him who pays for the mistake. On the other hand, he also gets to keep most of the windfall if he makes the right bet. There is an enormous incentive for him to be very very carefully in his investments -- and that largely accounts for his success.

The GIC, on the other hand, invests your money. The salaried employees don't get burnt or rewarded on the same level as when they invest their own blood and sweat savings. If the GIC makes a blunder, it's not their money they are losing, it's yours. That's why they are a lot more reckless and that's why they keep failing.

Anonymous said...

A small country should not behave like a big one because it lacks economic and political clout. But papa lee and his men have such big egos causing them to think otherwise.

Take the case of Temasek buying several percent shares in the Bank of China and China Construction Bank.

Temasek was allowed to do so along with such a few companies like Citibank - which by the way obtained concurrently the licence from the Chinese govt to open its branches in China, that one analyst estimates to number in the thousands.

But for Temasek the story turns out differently. Recently China demanded to buy over Temasek's 15% stake in Standard Chartered Bank. Odd demand but one can see the usual strategic mainland Chinese mind at work.

Anyway Temasek refused to sell the stake to China.

The result, Temasek had to offload a chunk of its stake in BOC and CCB running in millions and billions of shares.

Well not surprising. We all know similar treatment had been meted out to Temasek in Thailand and Indonesia as well.

All countries protect their national assets jealously and often with strong nationalistic instincts.

Why do papa Lee and his men continue to self delude themselves that Singapore governmental investments given their political connotation can have a free play in the global market?

It is feared more is to come even in seemingly democratic countries like India. Once there is change of administration, policies on foreign investment can be overturned overnight.

These countries might not dare to touch companies like HSBC and Citibank hailing from big countries.

But what is Singapore to them?

This take is not due to thinking inferior about our own country; it is simply realpolitiks.

Papa lee and his men are deceiving themselves that they are so influential and respected around the world especially when papa lee is often invited here and there to preach to others.

They have still not woken up from their egoistic dreams and our people are going to suffer for their grave error.

Anonymous said...

Anon 1.45am,

I was being sarcastic when i said i'd like to hear them rap about this UBS investment. i was just making banter - this is a blog after all.

Sorry for saying this, but calling me naive and asking me to go back to my NS barracks...quite unconstructive and a bit personal, when u dont even know who i am. it wont help anyone to be well-informed if they're asked to go back to their barracks when they say something incorrect, right? and you flatter me by thinking i'm that young, thanks.

I look forward to hearing from more helpful commentors on this post, on where i should read more.

to your comment UBS is nowhere near ML or GS, in terms of profitability, UBS scored better than GS last year. ML not even on the top ten list.

In terms of 2007 market cap, UBS is seventh. ML and GS are not in the top ten.

so your argument that UBS is nowhere close to ML and GS is open to further argument.

US govt allowed Abu Dhabi to come in and invest in Citigroup. So i think US govt (or Big Brother as you put it) is open to sovereign funds.

And how are we to know whether GIC have had talks with all other banks and decided that UBS was the best one to invest in?

To Anon 5.42am, point taken. UOB bought OUB for $5.7b, and $11.5b means you can buy two small banks.

GIC invested $11.5b for 9% of UBS,one of the top banks in the world, making it the largest shareholder and quite possibly a seat in the Board of Directors. I tihnk that's a very good investment.

whether GIC's money is our money or not, no matter how we interpret it, its all still open to argument. the sad fact, we will never be able to come close to it, nor are we able to affect any GIC's decisions.

On the argument abt Li Ka Shing vs GIC, well, we are Singapore Inc after all. Singapore is run like a business, not a nation. so what else can we say to that? If we want to change it, then we should strive to change the people who lead the country.

Because, in the end, we CANNOT influence GIC, we should instead demand, as some of the commentors here have mentioned, more transparency. Not because we want to raise hell, but it would help in us not coming to wrong assumptions and conclusions.

The press should be allowed more freedom to investigate and report. it will keep everyone in the higher echelons in check.

and when the profits come in, inform us at the very least how the govt intends to share the profits.

aygee

Anonymous said...

Dear aygee,

Now you are making some sense. You rightly say that we should have more transparency from PAP and for the press to have more freedom. Alamak, surely this is not a new revelation to anyone, is it?

The reason there are so many PAP critics here on this blog is precisely PAP does'nt care a hoot about transparency and freedom of the press thus driving them into this space.

PAP being the owner of the media can anytime remove press editors that if it finds them a little daring. This it had done quietly all along and always looks like with a gag order, so that the victims and their colleagues will never be able to tell the world what transpired.

PAP understands that the first territory to fight for is the people's mind.

This is why it keeps such a tight control over the press and broadcasts its propaganda continuously. Now the Internet is creating breach albeit a small one in this tight system.

PAP will not relinquish its dictatorial rule out of a sense of fairness or belief in the spirit of democracy.

People should understand the tremendous risks to them posed by such a political system and they should seek at the least to fight off PAP's indoctrination by coming online to read the alternative views never published by the press.

Anonymous said...

Maybe it's just me but have'nt any of you noticed that Mr Tony Tan stammers and blinks a bit too much during the news conference ?? so much for confidence in the decision makers.
Oh well, definately not the type of news that would give me an erection. Not in a country where the elderly are "encouraged" to work as trishaw riders for tourists to mock.

Anonymous said...

Perhaps just a way to dump some junk America Dollars before they're deflated further?

Anonymous said...

how about dump it on the poor struggling Singaporeans?

That's the last thing it will happen, unless it's election time.
It will go into the pockets of the higher echelons first.

Anonymous said...

Hey, I thought prata man supposed to watch the reserves?

Sophie said...

haiyah, must look at the deal closely lah -- 9% coupon rates not good enuf ah?????

we must also look at the big picture

http://sophiesworld-sophiesworld.blogspot.com/2007/12/union-bank-of-singapre.html

Anonymous said...

Prata man is paid close to $4M a year to do what? Supposed his post was set up to spread the blame should PAP squander away the reserves, including your CPF savings.

Suspect there was already a problem with the reserves before the post was even created. SIP rumoured to have lost up to $35B to $40B hor!

Anonymous said...

According to this article Singapore actually invested US$30B in SIP. That's more than S$40B even in today's lower US$ rate.

5 years later in 1999 SIP was still losing money and had to allow the Chinese govt take a majority share of 65%. How much was paid by the Chinese govt is not known but you can bet they had squeezed the last drop from PAP.

Well this failed project was thought out by the brilliant LKY. He thought China was Singapore where he can do what he wants.

One sycophant lecturer teaching business strategy even boasted to an audience at that time that the PAP govt was so smart to put its flag down in a territory and conquer it where the Taiwanese and Hongkongers had not occupied. He, just like LKY, could not understand that territory belongs to China not Singapore.

When you got a load of dense and egoistic minds like that, it no wonder a big question mark now hangs over our national reserves.

When PAP cannot pay back people's CPF, it will come out with all kind of policies to prevent withdrawal as it is doing now. You can bet PAP can dream up more of such clever trickery to make people pay for their mistakes.

In the meantime, what do they care for an emptied national coffer?

It is still celebration time for PAP as they continue to pay themselves million $ with big fat raises and bonuses.

Anonymous said...

Er... GIC doesn't use CPF to invest, that's why we get super low returns on that (GIC abverages returns above S'pore's growth rates: go read the economist). But besides that, I agree that GIC should be more transparent when it comes to making investment decisions. From the horse's mouth however (ie. from someone working at GIC), they can't do that for some strategic reasons. ie: to prevent some friendly neighbours from taking free loans from us. (Remember the Indonesia 10 billion dollar loan?!)Though I dun think its an excuse enough, I take heart from the fact that they may eventually have no choice but to become transparent-- ie. to prevent another Shin corp massacre

nacho said...

HAHAHAHAHA good thing i have not become a pr in singapore.

Anonymous said...

Too bad UBS is already down 50% since GIC invested in them. One thing Singapore has proven is that unsophisticated investors like themselves and some mid-east money will throw money at banks when no one else would even consider it. Too bad for our CPF funds.

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