The Government of Singapore Investment Corporation (GIC) said yesterday the timing of its acquisition of stakes in UBS and Citigroup could have been better.
But it continues to stand by its belief that its long-term investments in the two giant banks will pay off.
Questions about its paper losses in the troubled banks were raised during a press conference held in conjunction with the release of GIC's annual report yesterday.
Chief investment officer Ng Kok Song said: 'We would have liked the timing of the investments to be better, but these are long-term investments.'
He acknowledged that GIC had suffered some paper losses from its 11 billion Swiss franc (S$14.3 billion) investment in UBS, whose share price had plunged 59 per cent since last December.
GIC is also believed to have suffered some paper losses from its US$6.9 billion (S$9.8 billion) investment in Citi. The American bank's share price has fallen 26 per cent since January, when GIC injected funds.
UBS and Citi have been hit by combined write-downs of US$100 billion in investments l`inked to the sub-prime mortgage crisis to date.
Market watchers have suggested that GIC may have secured a better price if it had waited several months before taking stakes in the two banks.
But Mr Ng emphasised that GIC still expects to 'get good returns' over the long term. He added that its investment in UBS is protected by several features.
The deal is in the form of convertible notes paying an annual return of 9 per cent. GIC is set to convert its UBS notes into shares in 2010.
The deal carried a clause allowing GIC to renegotiate for a lower maximum conversion price for the shares in the case of a large rights issue. This was triggered in May.
As for the Citi deal, GIC gets a fixed annual dividend of 7 per cent from a perpetual convertible security.
In response to questions about whether GIC saw the need sit on the board of either bank, deputy chairman and executive director Tony Tan said that GIC does not intend to do so 'for the time being'.
'We can make our views known as shareholders to UBS and Citigroup and are happy that we are able to give input ...to the boards and management of (the banks),' Dr Tan said.
This article was first published in The Straits Times on September 24, 2008.
