17th Jan 2008
SINGAPORE (AFP) — An unprecedented financial situation in the United States and Europe led the Singapore government's investment agency to take multi-billion-dollar stakes in overseas banks, an executive of the Singapore firm said in a report Thursday.
But the Government of Singapore Investment Corporation (GIC) has not changed its investment strategy of traditionally buying relatively small passive stakes in a diversified body of securities, GIC's managing director and group chief investment officer was quoted as saying in The Business Times.
Ng Kok Song's comments came after GIC said Tuesday it would invest 6.88 billion US dollars in US banking giant Citigroup, whose finances have been battered by a US housing slump.
The Citigroup deal came just over a month after GIC said it would pump almost 10 billion dollars into Swiss bank UBS, another victim of the crisis in the United States subprime mortgage sector.
Ng said the approach taken on these two transactions "differs from our norm as GIC sees the current financial situation in US and Europe as being unique and unprecedented."
He said there is no change in GIC's investment strategy.
"A confluence of factors, like the subprime crisis, the credit squeeze and a possibility of recession, has led some banks with strong franchises to require urgent capital infusions," he was quoted as saying.
The large Citigroup and UBS stakes are "a bit of a departure" for the traditionally conservative GIC, said Leon Perera, group managing director of Spire Research and Consulting in Singapore.
"I think it's opportunistic," he said.
GIC was formed in 1981, managing only a few billion dollars of the city-state's foreign reserves. Today it says it manages "well above" 100 billion dollars, and analysts say the true figure could be 300 billion or more.
Subprime loans flourished at the end of a US housing boom as lenders offered mortgages to people with shaky credit. A subsequent wave of defaults has battered global banks.
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