Concern that bank would be nationalised may be a factor, say analysts
By
Fiona Chan
Temasek paid 720 pence a share or 975 million pounds for its Barclays stake in July 2007. The purchase was meant to help Barclays take over Dutch bank ABN Amro in a deal that would have created the world's No. 6 bank by market value. -- PHOTO: BT
UNCERTAINTY may have been one of the reasons behind Temasek Holdings' decision to sell off its stake in British bank Barclays in December and January despite the huge loss it would make, fund managers said on Thursday.
Reacting to reports that the state investment agency had offloaded its entire 2 per cent stake at an estimated loss of 500 million pounds to 600 million pounds (S$1.2 billion to S$1.4 billion), they said Temasek could have been concerned that Barclays would be nationalised by the British government.
TEMASEK Holdings has retained its position as one of the world's most transparent sovereign wealth funds (SWFs).
It attained a perfect score on the latest Linaburg-Maduell Transparency Index, published quarterly by the Sovereign Wealth Fund Institute in California.
Nationalisation would have made the shares almost worthless and was 'one of the fears that all investors had at the time', said Mr Wong Kok Hoi, chairman and chief investment officer of APS Asset Management.
'There was extreme concern about the viability of the banks. Most Western banks were technically bankrupt.'
Other analysts noted that Barclays was facing potential cash calls at the time, which would have forced existing investors to pay up to keep the bank solvent.
Fund managers offered other suggestions as to why Temasek sold the shares in the volatile December-January period, when the shares swung from 47.3 pence to 190.6 pence. On Wednesday, they closed at around 260 pence.
Temasek paid 720 pence a share or 975 million pounds for its Barclays stake in July 2007. The purchase was meant to help Barclays take over Dutch bank ABN Amro in a deal that would have created the world's No. 6 bank by market value.
But Barclays eventually lost out to a consortium led by the Royal Bank of Scotland. A few weeks later, the sub-prime crisis surfaced, and Temasek lost £150 million on its Barclays investment in just a month, reports said then.
If Temasek had hung on, its paper losses would have been trimmed in the recent market rally. Reports say the Abu Dhabi-based International Petroleum Investment Co made a windfall profit of US$2.5 billion (S$3.6 billion) on its Barclays investment after seven months.
But it would have been impossible for Temasek to know back then that the markets would rebound, said fund managers.
Read the full story in Friday's edition of The Straits Times.
