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<TABLE border=0 cellSpacing=0 cellPadding=0 width="100%"><TBODY><TR>June 5, 2009
WHY TEMASEK SOLD BARCLAYS
</TR><!-- headline one : start --><TR>Uncertainty may be behind sale: Analysts
</TR><!-- headline one : end --><TR>Concern that bank would be nationalised may be a factor, say fund managers </TR><!-- Author --><TR><TD class="padlrt8 georgia11 darkgrey bold" colSpan=2>By Fiona Chan
</TD></TR><!-- show image if available --></TBODY></TABLE>
<!-- START OF : div id="storytext"--><!-- more than 4 paragraphs -->UNCERTAINTY may have been one of the reasons behind Temasek Holdings' decision to sell off its stake in British bank Barclays in December and January despite the huge loss it would make, fund managers said yesterday.
Reacting to reports that the state investment agency had offloaded its entire 2 per cent stake at an estimated loss of £500 million to £600 million (S$1.2 billion to S$1.4 billion), they said Temasek could have been concerned that Barclays would be nationalised by the British government.
<TABLE width=200 align=left valign="top"><TBODY><TR><TD class=padr8><!-- Vodcast --><!-- Background Story --><STYLE type=text/css> #related .quote {background-color:#E7F7FF; padding:8px;margin:0px 0px 5px 0px;} #related .quote .headline {font-family: Verdana, Arial, Helvetica, sans-serif; font-size:10px;font-weight:bold; border-bottom:3px double #007BFF; color:#036; text-transform:uppercase; padding-bottom:5px;} #related .quote .text {font-size:11px;color:#036;padding:5px 0px;} </STYLE>
PHOTO: REUTERS
Bank of America
</TD></TR></TBODY></TABLE>Nationalisation would have made the shares almost worthless and was 'one of the fears that all investors had at the time', said Mr Wong Kok Hoi, chairman and chief investment officer of APS Asset Management.
'There was extreme concern about the viability of the banks. Most Western banks were technically bankrupt.'
Other analysts noted that Barclays was facing potential cash calls at the time, which would have forced existing investors to pay up to keep the bank solvent.
Fund managers offered other suggestions as to why Temasek sold the shares in the volatile December-January period, when the shares swung from 47.3 pence to 190.6 pence. On Wednesday, they closed at around 260 pence.
Temasek paid 720 pence a share or £975 million for its Barclays stake in July 2007. The purchase was meant to help Barclays take over Dutch bank ABN Amro in a deal that would have created the world's No. 6 bank by market value.
But Barclays eventually lost out to a consortium led by the Royal Bank of Scotland. A few weeks later, the sub-prime crisis surfaced, and Temasek lost £150 million on its Barclays investment in just a month, reports said then.
If Temasek had hung on, its paper losses would have been trimmed in the recent market rally. Reports say the Abu Dhabi-based International Petroleum Investment Co made a windfall profit of US$2.5 billion (S$3.6 billion) on its Barclays investment after seven months.
But it would have been impossible for Temasek to know back then that the markets would rebound, said fund managers.
'Of course, in hindsight, it was probably not the best time to sell the stake, but you don't have the benefit of hindsight when you're actually in that situation,' said Mr Wong Sui Jau, general manager of Fundsupermart. Temasek received an 'unprecedented amount of public scrutiny' over its exposure to flailing global banks because of the crisis, he said.
Some fund managers also suggested that the sale was in line with Temasek's plan to restructure its portfolio by cutting exposure to the United States and Europe and the financial sector, and focusing on global emerging markets and Asia.
This would also help explain Temasek's move, revealed last month, to sell all its shares in Bank of America (BoA) at an estimated loss of US$2.3 billion to US$4.6 billion. Temasek explained that it had originally bought into Merrill Lynch - a better fit for its globalised investment strategy - but those shares became BoA shares when the two banks merged.
Fund managers said Temasek's portfolio must be viewed as a whole and not as individual investments.
'These high-profile deals attract a lot of attention, but it's important to keep things in perspective,' said Mr Wong.
'Even if you take a big hit on one or two investments, your overall return could still be very good.'
Another fund manager, who declined to be named, said that while the losses incurred on the Barclays and BoA sales appear large, they are 'just a few per cent' of Temasek's overall portfolio, which analysts recently estimated at $143 billion.
He added the Barclays sale could have been triggered when losses hit a certain level - a common practice in the fund management industry to minimise losses.
When contacted yesterday regarding the Barclays sale, Temasek referred to recent public remarks on the agency's strategy and the sale of the BoA stake.
For instance, Finance Minister Tharman Shanmugaratnam said in Parliament last week that Temasek reassesses its investments regularly to enhance overall value. 'This means that Temasek may divest an investment, even at a loss, to get a better mix of risks for its overall portfolio, or to position itself to take advantage of opportunities elsewhere,' he noted. [email protected]
WHY TEMASEK SOLD BARCLAYS
</TR><!-- headline one : start --><TR>Uncertainty may be behind sale: Analysts
</TR><!-- headline one : end --><TR>Concern that bank would be nationalised may be a factor, say fund managers </TR><!-- Author --><TR><TD class="padlrt8 georgia11 darkgrey bold" colSpan=2>By Fiona Chan
</TD></TR><!-- show image if available --></TBODY></TABLE>
<!-- START OF : div id="storytext"--><!-- more than 4 paragraphs -->UNCERTAINTY may have been one of the reasons behind Temasek Holdings' decision to sell off its stake in British bank Barclays in December and January despite the huge loss it would make, fund managers said yesterday.
Reacting to reports that the state investment agency had offloaded its entire 2 per cent stake at an estimated loss of £500 million to £600 million (S$1.2 billion to S$1.4 billion), they said Temasek could have been concerned that Barclays would be nationalised by the British government.
<TABLE width=200 align=left valign="top"><TBODY><TR><TD class=padr8><!-- Vodcast --><!-- Background Story --><STYLE type=text/css> #related .quote {background-color:#E7F7FF; padding:8px;margin:0px 0px 5px 0px;} #related .quote .headline {font-family: Verdana, Arial, Helvetica, sans-serif; font-size:10px;font-weight:bold; border-bottom:3px double #007BFF; color:#036; text-transform:uppercase; padding-bottom:5px;} #related .quote .text {font-size:11px;color:#036;padding:5px 0px;} </STYLE>
Bank of America
</TD></TR></TBODY></TABLE>Nationalisation would have made the shares almost worthless and was 'one of the fears that all investors had at the time', said Mr Wong Kok Hoi, chairman and chief investment officer of APS Asset Management.
'There was extreme concern about the viability of the banks. Most Western banks were technically bankrupt.'
Other analysts noted that Barclays was facing potential cash calls at the time, which would have forced existing investors to pay up to keep the bank solvent.
Fund managers offered other suggestions as to why Temasek sold the shares in the volatile December-January period, when the shares swung from 47.3 pence to 190.6 pence. On Wednesday, they closed at around 260 pence.
Temasek paid 720 pence a share or £975 million for its Barclays stake in July 2007. The purchase was meant to help Barclays take over Dutch bank ABN Amro in a deal that would have created the world's No. 6 bank by market value.
But Barclays eventually lost out to a consortium led by the Royal Bank of Scotland. A few weeks later, the sub-prime crisis surfaced, and Temasek lost £150 million on its Barclays investment in just a month, reports said then.
If Temasek had hung on, its paper losses would have been trimmed in the recent market rally. Reports say the Abu Dhabi-based International Petroleum Investment Co made a windfall profit of US$2.5 billion (S$3.6 billion) on its Barclays investment after seven months.
But it would have been impossible for Temasek to know back then that the markets would rebound, said fund managers.
'Of course, in hindsight, it was probably not the best time to sell the stake, but you don't have the benefit of hindsight when you're actually in that situation,' said Mr Wong Sui Jau, general manager of Fundsupermart. Temasek received an 'unprecedented amount of public scrutiny' over its exposure to flailing global banks because of the crisis, he said.
Some fund managers also suggested that the sale was in line with Temasek's plan to restructure its portfolio by cutting exposure to the United States and Europe and the financial sector, and focusing on global emerging markets and Asia.
This would also help explain Temasek's move, revealed last month, to sell all its shares in Bank of America (BoA) at an estimated loss of US$2.3 billion to US$4.6 billion. Temasek explained that it had originally bought into Merrill Lynch - a better fit for its globalised investment strategy - but those shares became BoA shares when the two banks merged.
Fund managers said Temasek's portfolio must be viewed as a whole and not as individual investments.
'These high-profile deals attract a lot of attention, but it's important to keep things in perspective,' said Mr Wong.
'Even if you take a big hit on one or two investments, your overall return could still be very good.'
Another fund manager, who declined to be named, said that while the losses incurred on the Barclays and BoA sales appear large, they are 'just a few per cent' of Temasek's overall portfolio, which analysts recently estimated at $143 billion.
He added the Barclays sale could have been triggered when losses hit a certain level - a common practice in the fund management industry to minimise losses.
When contacted yesterday regarding the Barclays sale, Temasek referred to recent public remarks on the agency's strategy and the sale of the BoA stake.
For instance, Finance Minister Tharman Shanmugaratnam said in Parliament last week that Temasek reassesses its investments regularly to enhance overall value. 'This means that Temasek may divest an investment, even at a loss, to get a better mix of risks for its overall portfolio, or to position itself to take advantage of opportunities elsewhere,' he noted. [email protected]
