Friday, December 21, 2007

BREAKING NEWS : Temasek to put US$5B into Merrill Lynch!

"They can write big checks and these banks appreciate that.'' -David Cohen on Temasek.
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First the GIC pumped cash into UBS, now Temasek is pumping money into Merill. In Singapore the govt has long believed that giving the poor enough assistance for basic living creates a dangerous moral hazard and incentivise their subprime economic performance. Merrill Lynch is cash-strapped due to bad investments in mortgage backed securities. Helping Merrill to recapitalise will get them out of the mess. I guess when there is a chance to make some good money Temasek is able to overcome the hurdle of moral hazard.

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Merrill May Get $5 Billion Investment From Temasek, WSJ Says
By Kelly Riddell and Jean Chua

Dec. 21 (Bloomberg) -- Merrill Lynch & Co., reeling from the biggest loss in its 93-year history, may receive a cash infusion of as much as $5 billion from Singapore's state-owned Temasek Holdings Pte., the Wall Street Journal reported.
Temasek's board has given preliminary approval for the investment, the report said, citing people it didn't identify. Merrill Chief Executive John Thain, who took over Dec. 1, would join Citigroup Inc., Morgan Stanley and UBS AG in tapping a sovereign wealth fund to shore up capital.
Government funds ``are making use of the crisis to buy some of these banks on the cheap,'' said Nicholas Yeo, who helps manage more than $40 billion in Asian equities at Aberdeen Asset Management in Hong Kong. ``Whether they're buying cheaply enough is hard to say.''
Merrill on Oct. 24 announced $8.4 billion of writedowns on mortgage-related investments and corporate loans. The firm, which ousted Stan O'Neal as CEO in October, may report an additional $8.6 billion writedown for the fourth quarter, according to David Trone, an analyst at Fox-Pitt Kelton Cochrane Caronia Waller.
Governments in the Middle East and Asia have agreed to invest about $25 billion in Wall Street firms since banks began to disclose subprime losses. Merrill's shares slumped 42 percent in New York this year, cutting its market value to $46.7 billion. The firm reported a $2.2 billion loss for the third quarter.
Rob Stewart, a Hong Kong-based spokesman for Merrill, declined to comment. Temasek, the biggest shareholder of Standard Chartered Plc and DBS Group Holdings Ltd., also declined to comment.
Citi, Morgan Stanley
Citigroup Inc., the biggest U.S. bank by assets, said Nov. 27 that Abu Dhabi would invest $7.5 billion in the New York-based company. State-controlled China Investment Corp. is buying an almost 10 percent stake in Morgan Stanley for $5 billion after the second-biggest U.S. securities firm reported a loss of $9.4 billion from mortgage-related holdings on Dec. 19.
UBS, the biggest Swiss bank, made an agreement this month to replenish its capital with 13 billion Swiss francs ($11.2 billion) from the Government of Singapore Investment Corp. and an unidentified Middle Eastern investor.
Temasek is in advanced talks with Merrill about the investment, although pricing, timing and regulatory issues need to be negotiated, the Wall Street Journal reported. The fund manages more than $100 billion of assets, including controlling stakes in seven of Singapore's 10 biggest companies by market value.
They ``may feel there are bargains out there,'' said David Cohen, an economist at Action Economics in Singapore. ``They can write big checks and these banks appreciate that.''
To contact the reporter on this story: Kelly Riddell in Washington at Kriddell1@bloomberg.net .

11 comments:

Anonymous said...

WOow, they can write big checks....
how much do they write to you when you serve NS? hahaha

How much more when you hit 85? appreciate that? :-)

Anonymous said...

The American and European Governments themselves are pumping big money into the banking system and we are getting into the fray to give big brother some support. I hope they are right in saying that they are in control of the situation, otherwise we are in for some more hidden losses that no one is going to take responsibility.

Anonymous said...

Trust PAP.

GIC and Temasek always smell excellent opportunities when laymen like us knows little about ... like Suzhou Indusrial Park, Shin Corp and Barclays. Makes billions of dollars, okay. Only with the a minus sign in front lah.

Temasek went into Shin Corp like a tigress scorning all the groudswell of the Thai populace against the buyover. But when things rotted with the downfall of Thaksin, it became a pussy cat, cowering from the backlash.

What more Temasek pays Goldman Sachs big money to advise Temasek to buy Shin Corp, never mind Temasek has it own investment professionals.

That way all the Western bankers will think highly of Temasek, mah.

And then when excellent opportunities like Merrill Lynch and UBS arise, Temasek and GIC will be further strongly advised by such expensive consultants like Goldman Sachs to invest, as though it is a exclusive information.

Splurge and splurge to show the world how wealthy this economy that PAP built.

The only problem is that the money they are using are mostly CPF savings belonging to Singaporeans.

Unfortunately, there are still some who mistakenly think it is all national reserves proper - i.e. the surplus from the annual budgets - that are being used for such investments.

More than 10 years after SIP, PAP is talking about SIP revenues in tens of millions $ when it had pumped tens of billions.

Shin Corp share price is now half of what it was when Temasek took over in early 2006.

Trust PAP, it knows what it is doing.

LuckySingaporean said...

anon 11:21,

You said Shin corp is now worth half of what Temasek paid.

I wonder if I can also get a 50% discount on UBS. Don't mind buying when we get there.

Anonymous said...

Hehe, Lucky, you are such an astute investor. Watch they fall then raid lah!

Any good investment tips for the day from you?

Anonymous said...

thanks for posting the news, but pls leave a proper credit so as to be more credible.

http://www.bloomberg.com/apps/news?pid=20601080&sid=aMQKmiu8hK30

Anonymous said...

Just imagine they can afford to pump billions of investment to rescue these foreign companies but would not even consider dropping the 2% GST increase or help provide further assistance to the destitute poor, unemployed Singaporean peasants.

They prefer to increase their already obscene salaries at the time of rising costs without any due consideration to the sensitive feelings of the peasants who are still suffering with stagnant salaries.

How uncompassionate have our leaders become ?

Anonymous said...

Well, they want to put their money where everyone can see and talk about how the little red dot can make a difference to the world economy.

Think also about the meagre help they are willing to fork out to help the poor, but their readiness to spend hundreds of millions for upgrading to buy votes. Why help the poor when such help is not reaping returns by way of exposure.

They really want more bang for their bucks.

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