What A Complete Balls Up!

What A Complete Balls Up!

Investment strategy is not that difficult to grasp. You buy low, and sell high.

On 7 Feb 2009, the minister mentor Lee Kuan Yew told 1,500 of his Tanjong Pagar constituents at a Lunar New Year dinner that the Singapore government turned many of its stocks and shares into cash early last year before prices went down and invested in the American banks. Mr Lee explained: “When we invest, we are investing for 10, 15, 20 years. You may look as if you are making a big loss today, but you have not borrowed money to invest. You will ride the storm, the company recovers, your shares go up.”

A Form 13F filing to the U.S. Securities and Exchange Commission has revealed that Temasek no longer held shares in Bank of America(BofA) or Merrill Lynch as of March 31. Reuters cited a source briefed on the deal saying that the shares were sold for between US$2.53 and US$14.81 in the first quarter. Based on a Reuters calculation which assumed an average price of US$8.67, Temasek may have suffered a loss of about US$4.26 billion. The loss on the BofA shares adds to the $2 billion paper loss Temasek took when it converted Merrill shares into 189 million BofA shares. The BofA stake sale was confirmed by a Temasek spokeswoman on Friday, but she declined to reveal the average price it got for its 188.8 million shares or why or exactly when it was sold. An important question that begs asking: who has the balls to reverse Lee Kuan Yew’s long term investment strategy?

And there is the question of timing. Temasek unloaded all its shares by the end of the first quarter of this year, just before an April rally that saw BofA shares double from US$7 to US$14. Only 3 days ago, US Treasury Secretary Timothy Geithner was quoted as saying that the US Financial system has completed a big part of a painful adjustment away from its excessively leverage state, and was “starting to heal”. None of the other sovereign wealth funds that had bought into the investment banks has exited their investments. So who exactly in Temasek is trying be smarter than Geithner? As Song Seng Wun, chief executive of CIMB Research in Singapore, told Reuters: “It seems they feel the China growth story is better than the ‘green shoots’ of recovery in the US”.

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