Singapore PM's Wife Hit For Temasek's Loss Of $4.6-B In Merril Lynch
Citizen Online, which operates out of Singapore, has blasted Ho Ching, wife of Singapore Prime Minister Lee Hsien Loong, for losing US$4.6-billion out of the US$5.9 billion the Singapore wealth fund Temasek Holdings had invested in the defunct Merrill Lynch during the subprime mortgage catastrophe from 2007 to 2008.
Photo Insert: Ho Ching justified the loss in FTX as Temasek can “afford to be contrarian.”
Ho Ching managed Temasek from 2003 to October 2021 and she also invested $275 million in the bankrupt FTX cryptocurrency exchange managed by Sam Brinkman-Fried, which collapsed last month, with $2-billion worth of crypto evaporating.
Ho Ching justified the loss in FTX as Temasek can “afford to be contrarian.”
Contrarian investing means investing into assets on the “cheap” that go against the grain of market sentiment, hoping for the value of the assets to recover in the long run. This is because the value of those “cheap” assets acquired may just end up as zero, Citizen Online argued.
Another good example of a failed contrarian strategy employed by Temasek during Ho’s reign was its bet on Merrill Lynch during the 2007-2008 subprime crisis in the US. Before the crisis, US financial institutions became highly leveraged, increasing their appetite for risky investments and reducing their resilience in case of losses.
Much of this leverage was achieved using complex financial instruments such as off-balance sheet securitization and derivatives, which made it difficult for creditors and regulators to monitor.
In November 2007, Merrill Lynch announced it would write down US$8.4 billion in losses. The following month, Temasek jumped in with its “contrarian” approach to invest more than US$4 billion into Merrill Lynch thinking that it was buying on the cheap.
Temasek doubled down by announcing that it would invest another close to US$1 billion into Merrill, raising its stake in the troubled company to more than 10 per cent. As Temasek doubled down to buy more of Merrill’s shares, Merrill disclosed that it would take a further US$5.7 billion in debt-related writedowns.
Eventually, Bank of America (BOA) announced that it would buy Merrill Lynch in an all-stock deal. After the deal, Temasek decided to sell off its entire BOA stake. It sold off the BOA shares between January and March of 2009.
Dow Jones Newswires estimated that Temasek had lost some US$4.6 billion in its ill-fated “contrarian” venture to buy into the troubled Merrill Lynch.