Wednesday, April 2, 2008

Bad Investment by GIC

As you may recall, about 2 months ago the GIC (Government of Singapore Investment Corp) invested $10 billion into Swiss bank UBS. It looks like a very bad investment now.

Switzerland's biggest bank UBS unveiled another round of writedowns to the tune of 19 billion dollars! This is on top of the 18.4 billion they writedown last year. In total, UBS has lost more than 37 billion dollars due to the US subprime mortgage crisis. Over 37 billion!

UBS has tried to limit the damage by saying that it's current chairman, Marcel Ospel, would step down this year but I doubt that will help much. Afterall, the writedowns at UBS are far greater than those of American banks Citigroup and Merrill Lynch, which made UBS the biggest losers since the sub-prime crisis. The rescue by GIC (with an unnamed investor in the Middle East) was always risky, but now it seems that it a bad bet.

And to think, they turned down an offer of a seat on the board of UBS on top of this! What did Singapore actually gain from this risky investment? Nothing. What will Singapore gain from this risky investment in the future? Hopefully some oversight in the future.

Hey, a man can dream.


Anonymous said...

There goes our CPF money. I'd bet they'll start to think of some new policies to make it harder for us to get our retirement funds.

Not too long ago, they come up with the ridiculous idea of putting in $30,000 into CPF to be eligible for $600 interest. Are they treating us like children or idiots or what? Who in their right mind would put that kind of money just for a meagre return, only to have it stuck in there for good?

A wise person would rather invest that sum in a stable share and earn on the dividends. At least he'll have control of the money to use it anytime he wants.

Anonymous said...

A bad investment is a bad investment.

If there is a drastic drop in the value of the investment, the next thing we expect our GIC will say "What to do, it happened. Hope it will rise in future, as it is for the LONG term".

To say it is for long term is akin to denying the fact that a wrong decision had already been made at the wrong time to invest the funds .

The question is why were we so eager to go in at that point of time when the signs of a US recession were already surfacing.

Did anyone benefitted from it ?

Because of these wrong decisions at the macro level, does it mean that we peasants have to suffer at the micro level with further tweaking on on our future CPF withdrawals as witnessed recently ?

How come we are still in the dark as to the actual performance of our past GIC investments ?

Are our GIC investments actually making obscene profits or massive losses ?

Who can give us the real picture ?

Looks like we won't be getting any straight answer from the Gahmen.

Ghost said...

Like I said, hopefully we can get some oversight in the future. A long shot, but after the further writedowns by UBS, I think we can all safely that the GIC investment has gone sour. Hopefully this will cause them to be more transparent in the future