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Singapore’s GIC records its worst five-year performance in nearly a decade

Singapore’s sovereign wealth fund, GIC, has reported its poorest five-year returns since 2016, underlining the economic challenges faced by institutional investors amidst global economic slowdown, rising interest rates, and geopolitical tensions.

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1 year ago

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Singapore’s sovereign wealth fund, GIC, has reported its poorest five-year returns since 2016, posting annualized nominal returns of 3.7% for the five years ending 31 March.

GIC’s disappointing fiscal year reflects the downturn in equities resulting from efforts to curb inflation and the impact of Russia’s invasion of Ukraine. The returns also take into account major events such as the Covid-19 pandemic and escalating great power conflicts, but do not include the recovery since March.

The fund attributes the sluggish global economy and rising interest rates as contributing factors. GIC’s Chief Executive Officer, Lim Chow Kiat, issued a warning that the economy and markets are still experiencing the fallout from policy tightening. “We are not out of the woods yet,” he cautioned, “The consequences of the policy tightening are still being felt in the economy and markets.”

Despite the disappointing short-term results, the fund managed to achieve an eight-year high of 4.6% for its 20-year annualized real rate of return, marking its highest point since 2015. GIC does not disclose one-year results or the value of assets under its management.

The strong performance on the longer-term scale was largely due to the omission of a weak year in the early 2000s from the rolling computation window, which positively impacted the key return metric.

To navigate these challenging times, marked by soaring inflation, geopolitical unrest, and aggressive monetary policy tightening, GIC plans to continue focusing on investment opportunities that offer stable long-term returns, notably in the infrastructure field.

Jeffrey Jaensubhakij, GIC’s Group Chief Investment Officer, states that investments in infrastructure provide “inflation-protected returns,” a valuable asset in an uncertain environment. The fund is specifically focused on businesses that generate stable, predictable, and often inflation-linked cash flows across macroeconomic cycles.

In response to the global shift toward green energy and the digitalization of the economy, GIC sees a growing demand for new infrastructure such as fibre networks, data centres, and green power generation and storage. Since 2016, the fund has quintupled the size of its infrastructure portfolio, committing annually between US$10 billion to US$20 billion across six continents.

As a result of this increased emphasis on infrastructure, the fund’s real estate allocation rose to 13% as of March 2023, up from 10%. Allocations to emerging market equities have also risen by one percentage point to 17%, while those to developed market equities have decreased to 13%. Cash now accounts for approximately a third of the portfolio.

Despite the unsettling short-term losses, GIC continues to maintain a cautious investment stance. Its diversified portfolio offers some cushion against market corrections. Nominal bonds and cash, traditionally viewed as safer investments, still comprise the largest share of the portfolio at 34%, albeit down from 37% a year ago.

The losses suffered by GIC could be significant. The fund’s portfolio is estimated to be worth S$1,237b ($1,046b estimated in February 2022, with an additional $191b transferred to GIC by the Monetary Authority of Singapore in FY2023). Thus, the potential loss could amount to around S$74.6b, based on a -6.03% return ($1,237b x 6.03%).

This figure is derived from last year’s return for a 60/40 portfolio (comprising 60% MSCI World and 40% FTSE World Government Bond – Developed Markets (Hedged EUR)), which was -6.03%.

If the 37.9% global stock market loss in 2002 is discounted and the 20-year annualized return last year rose from 4.2 to 4.6%, the actual loss may be higher than the current estimate. This latest development places GIC, and by extension, Singapore’s financial landscape, in a precarious position.

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Taiwan’s FSC rejects CTBC Financial’s bid to acquire Shin Kong Financial, favoring Taishin’s merger plans

Taiwan’s Financial Supervisory Commission rejected CTBC Financial’s tender offer to acquire Shin Kong Financial, raising concerns about its plan, while Taishin Financial moves closer to a merger with Shin Kong. Both companies have scheduled shareholder meetings for 9 October.

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3 days ago

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17 September 2024

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On 16 September 2024, Taiwan’s Financial Supervisory Commission (FSC) rejected an application from CTBC Financial Holding Co. to launch a tender offer for Shin Kong Financial Holding Co., potentially clearing the path for Taishin Financial Holding Co. to proceed with its proposed merger with Shin Kong Financial.

Jean Chiu, vice chairperson of the FSC, stated at a press conference that CTBC Financial failed to provide a comprehensive implementation plan for the acquisition. CTBC had proposed acquiring between 10% and 51% of Shin Kong Financial’s shares initially, with plans to later fully integrate the company.

However, the FSC raised concerns over CTBC’s lack of detailed provisions on how it would manage various potential outcomes, particularly if it failed to secure full control of Shin Kong.

Additionally, the FSC highlighted gaps in CTBC’s understanding of the financial health of Shin Kong’s life insurance subsidiary, as well as a lack of firm commitments regarding raising the capital size of this subsidiary.

This uncertainty, combined with the method of payment proposed by CTBC—using a mix of cash and its own stock—raised concerns that the tender offer could negatively affect shareholders due to potential fluctuations in CTBC’s stock price during the transaction process.

CTBC’s proposal, announced on 20 August, included an offer of NT$4.09 (US$0.13) per share in cash and an exchange of 0.3132 CTBC shares for each Shin Kong share, amounting to NT$14.55 (US$0.46) per share. This bid was labeled by Taishin Financial as a hostile takeover attempt, as Shin Kong Financial’s board had not approved the offer.

In response, Taishin Financial, which has been vying for Shin Kong through a merger, revised its stock swap offer on 11 September.

The new offer included 0.672 Taishin shares plus 0.175 preferred shares for each Shin Kong share, translating to NT$14.18 per share—closer to CTBC’s offer. Taishin had earlier disclosed on 22 August its original plan to offer 0.6022 shares of its stock per Shin Kong share, which amounted to NT$11.32 (US$0.36).

Chiu emphasized that tender offers based on stock payments are rare in Taiwan, with only six cases since the 2002 revision of tender offer regulations.

She referenced Fubon Financial Holding’s acquisition of Jih Sun Financial in 2023, where cash was used instead of shares, to highlight how tender offers have traditionally been handled in the local market.

Chiu concluded by stating that although Taiwan’s financial market operates on free-market principles, takeovers should avoid disrupting market order and respect corporate stability.

Taishin Financial and Shin Kong Financial are set to hold a special general meeting on 9 October to secure shareholder approval for their merger plan, which will then require the FSC’s endorsement.

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Times Bookstores to close after nearly four decades in Singapore

Times Bookstores will cease operations in Singapore after nearly four decades, with its final outlet at Cold Storage Jelita closing on 22 September 2024. The closure is seen as being attributed to high rents, low sales, and rising operational costs, reflecting challenges faced by physical bookstores in Singapore.

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3 days ago

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16 September 2024

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Times Bookstores will end its operations in Singapore after nearly 40 years, as its last remaining outlet at Cold Storage Jelita on Holland Road is set to close on 22 September 2024.

In a farewell statement posted on Instagram on 16 September, the English book retailer, established in 1978, invited customers to visit the store one final time. “Our happily ever after has finally come,” the post read. “It is with both a heavy heart and a sense of fulfilment that we announce the closure of Times Bookstores.”

The closure of Times Bookstores has been anticipated for several years. The company, owned by regional consumer group Fraser and Neave Limited, closed its branches in Plaza Singapura and Waterway Point in February 2024.

The shutdowns triggered a discussion in Singapore’s literary community about how to better support bookstores.

Struggles Facing Book Retailers

Times Bookstores has been affected by increasing rent, low sales, and rising operational costs. The Covid-19 pandemic exacerbated its challenges, with the business quietly closing outlets at Marina Square and Paragon in 2021.

A key warning came in 2019 when the retailer closed its 8,000 sq ft Centrepoint branch, once one of Singapore’s largest bookstores.

These closures reflect a broader struggle for physical bookstores in Singapore. Rising rent, higher goods and services taxes (GST), and increasing printing costs have driven book prices up, making it difficult for traditional retailers to compete.

Popular bookstore also shut its Marine Parade outlet on 18 June 2023, citing similar reasons, while Books Kinokuniya closed its JEM branch on 9 May 2022 due to slow sales and rental costs.

Future of Singapore’s Bookstores

Following the closure of Times, few large bookstore chains remain in Singapore. Books Kinokuniya, the largest bookstore in Singapore, continues to operate its flagship store at Takashimaya Shopping Centre.

According to a spokesperson from Toshin Development Singapore, cited by the Straits Times, Kinokuniya remains a key tenant, though no specific renewal dates were disclosed. The spokesperson added that Kinokuniya continues to engage with the landlord regularly to appeal to patrons and remain in trend.

Although Times Bookstores will no longer have physical stores in Singapore, its book distribution business, which supplies books from international and local publishers to other retailers, continues to operate.

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