The local investing community was a buzz yesterday following this statement from Dr. Tony Tan, Deputy Chairman of the Government of Singapore Investment Corporation (GIC) that "the world may face its deepest recession in 30 years".
But what I'm deeply puzzled about is this:
If that really is the view of GIC, then why on earth did it make those significant investments in UBS and Citigroup. If its view of the situation is so pessimistic, then wouldn't its investments be poorly timed and irrational?
This is clearly a case whereby its thoughts versus its actions are not at all cohesive.
Don't get me wrong. I'm not saying that GIC is wrong and that all will be okay.
But I do think that this damning and pessimistic statement should not be taken so seriously.
Tuesday, April 22, 2008
Conflicting Views.
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7 comments:
I would like to point out that before GIC invested in the banks, GIC forsaw the crisis that was developing and had positioned themseleves accordingly.
1 August 2007
THERE are 'dark clouds on the horizon' for financial markets that ought to be acknowledged and heeded, said Dr Tony Tan, deputy chairman of the Government of Singapore Investment Corporation (GIC).
These risks include tightening credit due to the United States sub-prime mortgage crisis, he said, adding that GIC has 'taken necessary caution'.
Likewise now when they say that a global recession is likely, I would pay extra heed to their comments.
This is their outlook and that differs from their trading stretegy. Exactly what trading stretegy they had for the bank stakes is anybodys guess.
For all you know they might have miscalculated the risks and that's why they have revamped their management into 3 new oversight committees
If you say it's going to be bad and it turns out good, people don't mind.
If you say it's going to be bad and it turns out bad, "see, I told you so"
If you didn't say anything and it turns out bad, your head will roll.
I don't think the markets believe in his statement; otherwise, the markets will be down BIG BIG today.
It is often said that the reversal comes when public opinion is at its worst.
Let's see how the picture unfolds in the next few weeks.
IMHO, I think its just a pure ploy to get stocks cheap, its just 'talking down' the market, til GIC can accumulate the cash to pump it to replace what they sold off to buy the stakes in the foreign banks.
However, i do agree with Kleer, the mess seems to be clearing up. Ask anyone on the street what they think of the stock market recently, its no longer the ' damm jialat...' or ' losing so much dont come talk to me about stock market'. Now there is talk like ' wow did u see keppel corp rise' or ' DBS is not 19 bucks can you believe it ?'.
I believe that sentiments are improving, and all it needs is some good profit reporting to prop buyers back into the market again, and let the greediness return.....
if ubs has not been doing too badly, GIC will never ever has a chance to have a stake in it. it will be a good investment in time to come.
GIC's investment in UBS is a good call for a few reasons: 1) the preference shares structure guarantees upside of 9% for GIC 2) if GIC hadnt invested, another SWF would've swooped in 3) GIC can afford to wait & hold for the long term.
The debt markets are still in a big mess. Central banks can cut rates but banks are not lending to one another at those rates, but rather not lending at all or doing so at margins way above LIBOR. With all the sub-prime writedowns, there's less money to go around and it could take another 12-18mths to sort itself out.
But the stock market is not totally rational, and are probably still the best option for long-term individual investors since bank savings rates are abysmally low.
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