Singapore: Buy High, Sell Low II

Singapore officials' sense of superiority has taken another beating. A behind-the-curve bunch of sheep with MBAs may now be the truer image. While the sovereign wealth fund of Abu Dhabi has cleaned up on its investment in Britain's Barclays Bank, Temasek Holdings, still headed until October by Ho Ching, wife of Prime Minister Lee Hsien Loong, has bailed out at a loss estimated at around US$850 million.

The news didn't come out of Singapore, where embarrassments involving the first family get the minimum attention, but from analysts in London and New York studying the movement of major shareholders in Barclays. The citizens of Singapore were apparently not worthy of being told of how their money is being mismanaged.

Not content with buying into Barclays at a time when the banking sector was viewed as the way to easy riches, Temasek sold out close to the bottom of the market. The Abu Dhabi International Petroleum Investment Corp meanwhile bought in when Barclays was desperate and sold out just this week when the Barclays share price had recovered, netting a profit of £1.45 billion sterling (US$ 2.2 billion) in just seven months.

The Temasek debacle followed hard on the heels of massive losses on a Bank of America stake mostly acquired near the top of the market and sold close to the bottom. Temasek's loss is estimated at US$4.6 billion, or roughly US$1,000 for every Singaporean citizen. After the sale, presumably in March, the share price promptly rose by 66 percent.

Singapore Finance Minister Tharman Shanmugaratnam has claimed that despite recent losses Temasek has made gains averaging a respectable 15 respectable a year. However, this was during a sustained global bull market and also reflected the fact that some of its assets were state-owned companies whose shares had been transferred at non-market prices. These included power stations which have been sold off over the past two years, generating large gains which cannot be replicated.

Some aspects of Temasek are also so obscure that no proper analysis is possible. One black hole looks to be a leveraged investment in a series of private equity funds at the top of the market.

Having bought into financials near the top – making them 40% of its total portfolio -- and sold off near the bottom, it is now focusing on commodities, most recently buying a stake in locally listed agriculture company Olam international. It got a 13.76 percent stake at an 18 percent discount to the market, nonetheless it had already almost doubled in price this year thanks to a rebound in commodities which may or may not be sustained.

Not that it is completely neglecting financials. It is considering a stake in a consortium to buy AIG's asset management business. But potential partner in this is the high-profile Hong Kong businessman notorious for losing shareholders' money – Richard Lee of PCCW.

Nor can Temasek ignore the problems of Singapore state enterprises which must compete internationally. It has just had to inject equity to reduce the massive debt of money-losing ship-owner NOL. Meanwhile it is trying to offload loss-making manufacturer Chartered Semiconductor.

In short, Temasek's bad news is unlikely to be over. But don't expect to hear about it first in the local media.