International Business & Economy GIC refuses to disclose exact losses in UBS investment, S'poreans left speculating

GIC refuses to disclose exact losses in UBS investment, S’poreans left speculating




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GIC Pte Ltd, formerly known as the Government Investment Corporation Singapore (GIC), announced on 16 May that it was shedding 93 million shares – or 2.4 per cent of its 5.1 per cent stake – of Swiss bank, UBS Group.

GIC had purchased the shares at a total of US$11.5 billion in 2007/8.

Reuters reported that the offloading of the shares this week was done “at 16.10 Swiss francs each to bring in 1.5 billion francs.”

“At that time (in 2007/8) UBS shares were trading at about 50 francs, as the scale of capital and trading problems were only just emerging,” the Reuters’ report said.

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“The sale was conducted by UBS as sole bookrunner and wrapped up in two and a half hours,” the report said.

“The Singapore soveriegn wealth fund invested 11 billion francs in UBS through mandatory convertibles in December 2007, which converted into shares two years later to make it the bank’s biggest shareholder. GIC said Monday’s sale realised a loss, but did not say how big the loss was.”

According to International Financial Reporting Standards calculations, GIC Private Ltd is believed to be facing a loss in excess of 4 billion francs (US$4 billion, S$5.6 billion).

“GIC did not immediately reply to requests for comment on the size of its loss,” according to the Reuters’ report.

The exact sum lost in the investment was also not mentioned in GIC’s own statement which it released on Tuesday.

It said only: “The sale of shares realizes a loss on the UBS investment.”

GIC statement

GIC said that it “is disappointed that the UBS investment resulted in a loss, but its Citigroup investment has earned a positive return.”

“The combined return on the UBS and Citigroup investments has been positive in mark-to-market terms.”

GIC had purchased shares of Citigroup (worth US$6.9b) at about the same time as it did those of UBS, during the height of the financial crisis engulfing the world at the time.

GIC said that while it does “its best to ensure that each individual investment performs, it must accept a degree of risk in order to pursue promising opportunities and optimise overall portfolio returns.”

Nevertheless, there is no reason for the GIC not to be transparent and disclose the exact amount that has been lost in the UBS investment. After all, it is taxpayers’ money that was used for the purchase, amid controversial circumstances at the time.

Other Sovereign Wealth Funds (SWF), such as that of Norway, release and publish their accounts every year.

Without transparency from the GIC, Singaporeans are left to speculate how the losses have come about and the exact amount that has been lost.

According to the Reuters report, the loss is suspected to be about S$5.6 billion. But it is estimated that it is much bigger if the remaining 2.7 per cent stake is valued at the same price as the 2.4 per cent offloaded on Monday.

The estimate is in the range of S$10 billion.

But any figure is just speculative, since the GIC itself has chosen to keep mum on the exact amount.

Whatever the figure, it is clear that it is not a small sum, considering that it is the hard-earned money belonging to Singaporeans. The least the GIC should do is to be open about it and disclose how much has been lost.

If the GIC does not disclose this in the coming days, perhaps Members of Parliament should raise it in the next sitting of the House.

If they do, we hope that the Government will not give the same excuse it gave when it was asked, several years ago, for the reasons for Charles Goodyear’s resignation from Temasek.

Then Finance Minister, Tharman Shanmugaratnam,  told Parliament:

“People do want to know, there is curiosity, it is a matter of public interest. That is not sufficient reason to disclose information. It is not sufficient that there be curiosity and interest that you want to disclose information.”

This time, it is not just about public interest but it is also about public funds – and how the Government must, not if or should, but must be accountable.

We hope our elected MPs will hold the Government to account and raise the matter in the House’s next sitting, if the GIC continues to remain silent.

It is unclear if the President himself has powers to query the GIC over the massive losses. President Tony Tan, however, was the Deputy Chairman and Executive Director of the GIC at the time when the shares were purchased. The late Lee Kuan Yew was the Chairman.

The UBS losses adds to those by PAP town councils which had invested in toxic financial products which came to light during the financial crisis when Lehman Brothers collapsed.

It was later revealed that 8 of the 14 PAP town councils had collectively lost some S$16 million in the toxic products.

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