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Three Big Lies about the National Reserves

“The national reserves must not be disclosed. If this is made public, the SGD can be subject to attacks by currency speculators” is the mantra of the Singapore government. Enough of this nonsense.

Speculative attacks happen during a currency crisis. A currency crisis is a consequence of chronic balance of payments deficits (it’s also called a balance of payments crisis). This is how it goes. Due to trade imbalances ie a chronic deficit, the domestic currency of the country is weakened. Its central bank either refuses or is unable to allow the exchange rate to fall. To maintain the rate, the central bank has to keep buying its domestic currency. It continues the buying policy till it runs out of foreign reserves. This leads to a financial crisis as the value of foreign debt rises in relation to the weakened domestic currency. Foreign currency liquidity freezes because no one’s going to sell the foreign currency to you if the exchange rate is forcibly maintained at unrealistic levels. Eventually the central bank capitulates because no one can go against the market in the long run. It is forced to devalue the domestic currency to bring it back to equilibrium. This type of scenario happens when the market anticipates that domestic policies will not be adjusted sufficiently to devalue the domestic currency. So they attack the currency by selling (shorting it) at the unrealistic high rate controlled by the central bank. Sooner or later when the government is forced to devalue, speculators buy back the currency at lower rates and make a killing.

From the above scenario, you should already know of 2 things:

(1). First BIG LIE. Currency crisis happens when the exchange rate does not respond to market conditions. There is sufficient empirical evidence that such scenarios happen in cases of a pegged currency, ie the rate is fixed to some other currencies. In the case of Singapore, MAS manages on the basis of a floating rate, using an official band to control daily volatility only. Should chronic trade deficits force the rate down, MAS will loosen the band to allow the SGD to devalue. So the above illustrated currency crisis scenario won’t happen in Singapore.

(2). Second BIG LIE. If the SGD is weakened and the MAS wants to cushion the devaluation, it is forced to intervene in the market to buy up as much of the domestic currency as possible. To do this, MAS makes use of its foreign reserves. Thus, the more forex reserves it holds, the stronger the MAS is to support the SGD. So here’s the rub. Like all central banks in the world, the holdings of forex reserves of the MAS are all in the open for the world to see. It is currently about SGD 427 billion. There is nothing secretive about it, and it has nothing to do with national reserves.

Currency speculators aren’t watching your reserves. There are watching the market. If the market sees the currency as over-valued, they know sooner or later the central bank has to devalue. Just like a poker player, if he sees he has a winning hand, he continues raising the stakes.

The Third BIG LIE is the increase in asset portfolio of the sovereign wealth funds. The numbers are impressive, but they don’t explain how the growth happened. In 2022 Temasek portfolio value grew by S$22b to S$403b, GIC grew by S$280b. Asset growth can come in a number of ways:

  • Internal growth (earnings ploughed back into the business): This is well and good and a pat on the shoulders.
  • Currency translation : Not good. It suggests lack of hedging strategies which could have gone one way or the other way. I mentioned in a previous blog the MAS, as a central bank, has to take on market risks which was why they got hit with a S$8.7b revaluation loss in 2022. Unlike MAS, GIC and Temasek can make hedging strategies to minimise translation risks.
  • Valuation : Good picks or bad picks,  investing expertise or pure luck, we can’t criticise from hindsight. CIO has to make a call. But generally, the last 2 decades have been good to investors who ride along with the massive liquidity pumped out by central banks all over which pushed markets to record heights. But what we should be concerned is the vast amount of holdings in unquoted equities, in both Temasek and GIC. The valuation is anybody’s guess.
  • Capital injection : Any idiot could have increased portfolio value with fresh funds. This is not an insult but an aphorism.
  • Leverage (funded by more loans): This is not bad per se, but it means increased risks. Debts for operational purposes are fine. Temasek has often spoken of taking advantage of cheap funds to leverage and it is creeping into the realm of private equity fund management business. Are they investing savings, or running a private equity business? We would prefer hard-nosed risk-averse managers, not Wall Street cowboys.

Note that GIC and Temasek make annual contributions to the government of NIR (net income return) based on 50% of a computed 20-year annualised rate on their ‘Net Relevant Assets’, in basic terms, assets less debts. This means that in a given year, the NIRC (net income return contribution) has no relation to the actual profit or loss. In 2022, the NIRC was S$21.6b but it’s not known how much came from GIC and how much from Temasek. We know MAS was unable to contribute due to its S$7.1b losses.

Read : An increase in the government’s assets is not an increase in national reserves which is assets net of national debt, and Singapore has one of the highest national debt in the world.

Where did Temasek’s S$22b asset growth come from?

- Was it from its operations? Temasek’s net profits in 2022 was S$10.6b. After deducting it’s share of the NIRC (how much ???), it did not generate much to increase the asset portfolio.

- Did it come from currency translation? It’s porfolio geographical distribution showed Singapore 27%, US 21%, but the currency distribution showed SGD 49%, USD 34%, HKD 7%. This shows there were currency hedges. USD appreciated 1% and HKD gained 0.3% over SGD. That means translation gains were not significant. Although CNY gained 3.7% over SGD and Temasek had substantial Chinese assets, these are in American Depository Receipts, which are basically USD assets.

- Did asset growth come from debts? Temasek had been taking on debt since 2014, rising from S$9b to S$90b as at 31 Mar 2022. In 2022 debt increased by S$8.5b.

- Did it come from capital injection? There was no fresh capital injection, in fact equity decreased by S$4.6b in 2022.

So where did the increase in S$22b in asset value come from? It came from a mix of operating gains (???), translation gains (???), and debt (S$8.5b) — shared more or less equally.

Where did GIC’s S$280b asset growth come from?:

- Did it come from profits? Who the heck knows. Checking out GIC performance is like looking into a black hole. We can only speculate. I’m betting my right arm GIC profits for 2022 wasn’t anything to crow about for the simple reason that if it were so, the state media would have celebrated the current year ROI instead of hiding behind a 20 year annualised rate and about returns beating inflation rate.

- Did it come from currency translation? We are looking at a black hole. But this much I can say. In terms of currencies, GIC has 2 sources of funds. One is from forex reserves from MAS. It is likely that these funds would be invested in the relevant countries so there is no asset-liability mismatch, no translation losses. Two is about S$1 trillion of SGD debt + land sales + budget surpluses which are subject to translation risks if invested overseas without a hedging strategy.

- Did it come from valuation? Again, no way to tell. But note that GIC had 37% portfolio in bonds and cash. The bonds should be bleeding heavy losses in the current rising interest rate scenario and was a significant dampener on profits.

- Did it come from injection of fresh funds? Aha, this, I have plenty to talk about.

GIC gained a fabulous S$280b in portfolio value in 2022. PAP uno numero fan Singapore resident Polish blogger Critical Spectator could not help but to write with glee. His Facebook  echo chamber of fawning supporters and opposition haters asked with unabashed sarcasm where are the critics now?  Sadly lacking is the independent brain power to stop and ask where did the increase come from.

Well, a substantial part of the increase came from fresh funds injected :

- S$108b from net increase in securities issued (issuance less redemptions)

- S$75b new RMGS issued (for MAS forex reserves transferred to GIC)

- S$13b from sales of land.

So S$196b fresh funds were provided to GIC to invest, of which S$183b was from government debt. And what did I say about capital injection? Any idiot can increase asset portfolio – it’s not an insult but an aphorism.

The more important question to ask is where did the increase of the balance of S$84b (S$280b-S$196b) of GIC’s asset increase come from? I have no idea and nobody’s talking.

Don’t we all know a narrative can be spin in several ways. GIC and Temasek squirmed in word salad instead of telling it as it is. GIC lectured about high falutin ‘Rolling 20 Year Annualised Rate Of Return’ that cannot be measured against anything. They will not plain speak about current year ROI. Temasek talked about their participation in Singapore Airlines’ mandatory convertible bonds issue “enabling the airline to strengthen its balance sheet and to position it for the resumption of global travel” and Sembcorp Marine’s rights issues “which strengthened its balance sheet and liquidity position, accelerating its strategic pivot to high-growth renewable and clean energy segments” when the whole world knows Santa Claus was bailing out two troubled companies.

 

* Article first appeared on Chempost – Down The Rabbit Hole.

 

 

 

 

yyy
READER COMMENTS BELOW

32 Responses to “Three Big Lies about the National Reserves”

  • Sinkies strengthened bo?:

    So these big companies use our money to strengthen their balance sheet. How about us?

    We get $600 asset increase and a big $23,000 debit. Gov going to suck back $23,000 and more.

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  • Harder Truths:

    Good article – this guy knows his financial stuff.

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  • Lie Or No Lie Doesn't Matter:

    Doesn’t matter lah.
    As if you will believe even if they tell you the truth.

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  • Temusik Patriot:

    The name is Con You a d the game is lying to YOU!!!

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  • Temusik Patriot:

    The name of Lie is CON YOU,and the game is Lying to YOU!!!

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  • Singaporeans R Free Riders:

    Lies ? Do you have documentary evidence to support it ?

    Do you know what is a lie ?

    Congratulations to the class of 2022!
    https://bit.ly/3Qb8TEp

    Please read the comments under the video.

    Now, that is lie by London School of Economic (LSE)…

    Don’t believe it ? Call:
    Dennis Weng-Jeng Peng
    Tel: +886-932-918951

    Now, where is the got degree guy illiterate PAP poster ?

    Gone into hidding ?

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  • Dr. Chan:

    @Singaporeans R Free Riders
    I know what is a lie.

    Let’s start with LeeConYou – The value of your HDB will only GO UP etc.

    Then Lau Goh – HDB Asset Enhancement, Swiss Standard of Living etc. President OTC request for amount of Reserve – Cannot provide – will take 50+ man years?

    Then Ah Loong – CPF is not your money. Foreign Trash will create jobs for locals etc. Purposely, install Hamilah (Malay, not Indian) as Puppet President so she can be obedient and not question on the Reserve.

    Idiot also know what game they are playing. Of course, PAP hide away all evidence, cover their tracks. – Make sure all the evidence are buried.

    Only a new government can come and open their can of worms. Until then, you can only guess because PAP (public servant) will never be transparent with their own citizen (supposedly their employer/boss).

    How ironic – Boss has to listen and take shit from Servant.

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  • Real Truths:

    Harder Truths:
    Good article – this guy knows his financial stuff.

    Really? oh..a d0g usually responds to its’ whistle-blower.

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  • xoxo:

    Some $cholars said they have become more thick-skinned.
    I guess thats why they have no qualms about lying and lying even after being discovered.
    So,they POFMA those who expose them?

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  • Sooner or Later, Exposed!:

    Sooner or later, everything will be exposed like pornzistars falling from the sky, baring all.

    A ponzi is a ponzi, no matter how one looks at it.

    The time will come when it is due for a checkmate! Lies lie beyond, beyond. Lies after lies after lies…

    Nowadays, numerous Parliaments are full of parliarmen making pariahmen’s statements.

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  • myfirstscrew:

    Remember, our sovereign funds are managed by foreign born/new citizens, there is something strange about this. Surely they keep better secret than locals.

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  • Before its too late:

    Can we handle the truth?
    So better do the needful come GE2024 ..
    …or else we might end up like SL..?
    The miws will jump ship and we’d be left to sink or swim..
    Can feel it in my bones.
    Never say never…it can happen.

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  • Undemocratic SG fake along:

    Harder Truths:
    Good article – this guy knows his financial stuff.

    Agree right thru and thru. Writer is excellent detective. The PAP only throw smoke at SG Brand sheeps, to earn their Multi Million dollars world’s most expensive salaries. Eg. Spend $20 million dollars to pour tea.

    Unlike commenters whose comments are that shallow to only see negatives and questions with no answers to trumpet

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  • James Lee:

    Given how SG were managed by the uncaring PAP elites and their cronies over the past few decades, of whatever trusts that remain have all but gone.All true blue SG should realize something is not right.Act before it’s too late.

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  • XOXO 2:

    ADDITIONAL Conditions For POFMA:

    When they cannot defeat you, they POFMA you.

    When the exposure is too hurting, they POFMA you.

    When they cannot argue with you successfully, they also POFMA you.

    When they don’t want to agree with whatever you have said, they POFMA you.

    When they know that they will lose the argument, they POFMA you.

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  • C’est la vie:

    ******
    As informative as the article is, … it’s utterly wasted.

    It’s best to let sleeping dogsssss (majority in sg) lie.

    Since they accept that they must pay land costs on the acquisition of a lease, … doubt at all, if they’ll be moved by anything written against their beloved trustees !!!

    Besides, … ignorance is bliss and blessed are those with that trait !!!
    ***
    ******

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  • Food panda bear:

    The biggest lie is all singaporeans count.
    Followed by no singaporean will be left behind.
    When dishing out our reserves,many singaporeans received only $600 whilst the government granted to non-singaporeans working here many times than the $23.5K each singaporean was supposed to get.
    Tell us,how do singaporeans count then?

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  • Bluff:

    To bluff the sheep,lah!

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  • BIG STORY: Stop the PAP Steal:

    Food panda bear:
    The biggest lie is all singaporeans count.
    Followed by no singaporean will be left behind.
    When dishing out our reserves,many singaporeans received only $600 whilst the government granted to non-singaporeans working here many times than the $23.5K each singaporean was supposed to get.
    Tell us,how do singaporeans count then?

    The Pledge that EVERY MOTHER F FORCED to recite is a PAP biggest con job FOR 50 LONG LOONG years.
    These IMMORAL PAP bastards deserved to die with their balls CUT and BURNED.

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  • BIG STORY: Stop the PAP Steal:

    C’est la vie:
    ******
    As informative as the article is, … it’s utterly wasted.

    It’s best to let sleeping dogsssss (majority in sg) lie.

    Since they accept that they must pay land costs on the acquisition of a lease, … doubt at all, if they’ll be moved by anything written against their beloved trustees !!!

    Besides, … ignorance is bliss and blessed are those with that trait !!!
    ***
    ******

    Let’s NOT DISCOUNT the Foreign Prostitutes PAP are attracting with freebies and giveaways that only citizens are entitled – I believe PAP has NOT BEEN ABLE to attract state living warriors.
    What SG has RESIDING here the million or so more are MONEY Grabbers. And the way its has been, and it is GOING, the establishing of a Nationalism Spirit among SGpns is a pipe dream, and PAP takes huge credit for forging polarity among a resilient society, NOT a sovereign state of SG when Hen has no guts to chide the PRC for detaining our Armour tanks, other than of course he cannot have or do have the Terrexes skin to admit his stupidity in the first place.

    The world of would be foreigners into SG is WATCHING, watching more how to dig gold from SGpns via courtesy of PAP Administration.

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  • Asd:

    I think educated people will have nothing to hide

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  • Wheres the proof Hen?:

    Just look at the way theyre bombarding wp’s mr leong ..re “new citizens enlisting in NS” issue.
    A pack of wolves hunting down a lamb.
    Whether mr leong committed some lapses with what he said..?
    How to prove that NEW Citizens do enlist ?
    Volunteer basis or really full time as all SG sons?

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  • Harder Truths:

    Wheres the proof Hen?:
    Just look at the way theyre bombarding wp’s mr leong ..re “new citizens enlisting in NS” issue.
    A pack of wolves hunting down a lamb.
    Whether mr leong committed some lapses with what he said..?
    How to prove that NEW Citizens do enlist ?
    Volunteer basis or really full time as all SG sons?

    In all my years in this God-forsaken island, I have never come across any FT volunteering to serve NS. However, I have seen many escape overseas before they are due to enlist. Those PR’s who do NSF are committed in some way here – but I know even then they still make sure they can move overseas back home if needed to. So they have the best of both worlds. $inkies have no such options.

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  • panyusg:

    Big Depression is coming says this author…
    https://www.globalresearch.ca/global-planned-financial-tsunami-has-just-begun/5784217

    Singapore will not escape..
    - Collapse of stocks, bonds, property prices
    - Many businesses will go bankrupt leading to high unemployment
    - Add on Covid, hospitals will be overwhelmed, crematorium will work 24/7
    - More suicides, divorces, perhaps as stress builds up.

    I pray it will not happen. However, for sure Singaporeans will not living on the streets or be starving. The country has enough to buy food and to house those who gave up their properties.

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  • theforgottongeneration:

    Wheres the proof Hen?:
    Just look at the way theyre bombarding wp’s mr leong ..re “new citizens enlisting in NS” issue.
    A pack of wolves hunting down a lamb.
    Whether mr leong committed some lapses with what he said..?
    How to prove that NEW Citizens do enlist ?
    Volunteer basis or really full time as all SG sons?

    This proof was already given by Ah Hen – he cited 3400 males new citizens doing NS each year. But we are taking in average 22,000 new citizens each year for past 15+++ years, meaning the statistics should be stabilized by now. That means only about 15% new citizens does NS, compared to a foreign population of about 40% now in SG. So is it really declining births or Hen helped made the case for Leong – that new citizens are NOT doing their PROPORTIONAL share of NS?

    Stupid Hen indeed.

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  • MarBowling:

    Undemocratic SG fake along:
    August 2, 2022 at 10:20 am (Quote)
    Harder Truths:
    Good article – this guy knows his financial stuff.
    Agree right thru and thru. Writer is excellent detective. The PAP only throw smoke at SG Brand sheeps, to earn their Multi Million dollars world’s most expensive salaries. Eg. Spend $20 million dollars to pour tea.

    Unlike commenters whose comments are that shallow to only see negatives and questions with no answers to trumpet

    Response: when that VIP(Very Impotent Person)Old Hag Nancy PourLotOfShit stepped onto the soil of Sinkapore(first time in her life)she must has LEFT her smelly footprint here! We must have spent lots of BOMB$$$$ just to host her GRAND ARRIVAL at the expense of our taxpayers hard earned money!

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  • Paid Mil$ to keep mum:

    Only the inner circle knows the true state of SG’s reserves…imo.
    Even Mdm POS,the highest officer in the land, doesnt know how many golden eggs she’s sitting on in her nest.
    Even if she asked , she wouldnt get the numbers..or perhaps the correct ones.
    Remember our dear late ex POS Mr Ong TC.
    They told him he doesnt understand his role as a puppet president of SG…
    How cruel.
    So i guess no questions allowed…just shut up, smile and collect your mil$..?

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  • NotMyProblem:

    PAP’s mother of all lies was, it takes 56 man-years to calculate SG’s reserves. Was that very dangerous for Singapore?

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  • Harder Truths:

    Undemocratic SG fake along: Agree right thru and thru. Writer is excellent detective. The PAP only throw smoke at SG Brand sheeps, to earn their Multi Million dollars world’s most expensive salaries. Eg. Spend $20 million dollars to pour tea.

    Unlike commenters whose comments are that shallow to only see negatives and questions with no answers to trumpet

    Very true. Too many sheep and too many million dollar salaries

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  • P Against People:

    One big joke.

    There is a giant treasure house. The CEO employs a $6 million security guard. “You guard this door. Only I can enter this door, and whatever I take out must get your agreement.” “Yes, Sir, for $6 million a year for 6 years, and 99.9% contract renewal, Sir, I will agree to anything, Sir.”

    While this door is “well guarded”, there are 100s of other doors. People can take out billions for investment, pay themselves undisclosed bonuses, performance bonuses, lousy performance bonuses, distribute mosquito repellent or buy high sell low. The security guard doesn’t care. That is beyond his job scope. He’s not guarding the treasure.

    His duty is to guard the one special door.

    Paid Mil$ to keep mum:
    Only the inner circle knows the true state of SG’s reserves…imo.
    Even Mdm POS,the highest officer in the land, doesnt know how many golden eggs she’s sitting on in her nest.
    Even if she asked , she wouldnt get the numbers..or perhaps the correct ones.
    Remember our dear late ex POS Mr Ong TC.
    They told him he doesnt understand his role as a puppet president of SG…
    How cruel.
    So i guess no questions allowed…just shut up, smile and collect your mil$..?

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  • MarBowling:

    P Against People:
    August 4, 2022 at 1:13 am (Quote)
    One big joke.

    There is a giant treasure house. The CEO employs a $6 million security guard. “You guard this door. Only I can enter this door, and whatever I take out must get your agreement.” “Yes, Sir, for $6 million a year for 6 years, and 99.9% contract renewal, Sir, I will agree to anything, Sir.”

    While this door is “well guarded”, there are 100s of other doors. People can take out billions for investment, pay themselves undisclosed bonuses, performance bonuses, lousy performance bonuses, distribute mosquito repellent or buy high sell low. The security guard doesn’t care. That is beyond his job scope. He’s not guarding the treasure.

    His duty is to guard the one special door.

    Response: THINK this is NOT ONE BIG JOKE, BUT A BIG REALITY, HAPPENING AND ONGOING ALL DAY AND NIGHT LOONG RIGHT UNDER THE NOSE OF ALL DAFT SINKAPOREAN, PERIOD!

    When it was OPENED UP for application, The QUEUE for this $6 million security guard job must be damn farking LOONG! Too bad, eventually only 3 specially NOMINATED candidates were SELECTED! That successful “SEE NO EVIL, HEAR NO EVIL AND SPEAK NO EVIL” Joker must be the LUCKIEST PERSON NOT ONLY IN SINKAPORE BUT ON PLANET EARTH!

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  • their own tongues:

    //This proof was already given by Ah Hen – he cited 3400 males new citizens doing NS each year. But we are taking in average 22,000 new citizens each year for past 15+++ years, meaning the statistics should be stabilized by now. That means only about 15% new citizens does NS, compared to a foreign population of about 40% now in SG. So is it really declining births or Hen helped made the case for Leong – that new citizens are NOT doing their PROPORTIONAL share of NS?//

    aiyoh. the white monkey idiots wayang so much that they have forgotten that they are getting their own tongues twisted ??? you will be amazed how hard they must keep up (no turning back ???) with their wayang ??

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