SINGAPORE'S RESERVES AND INVESTMENTS

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SINGAPORE'S RESERVES AND INVESTMENTS:

(Impact of financial crisis): 3.

Ms Ellen Lee asked the Minister for Finance in light of the recent spate of events in the financial sector, whether the financial position of our national reserves and investments, and monies invested by our various Government-linked companies and related organisations have been affected and, if so, by how much.

The Senior Minister of State for Finance (Mrs Lim Hwee Hua) (for the Minister for Finance): Sir, Ms Ellen Lee is understandably concerned by the intensification of the global financial crisis, and wanted to know how it had impacted our reserves.

The investment climate has indeed been challenging. Since the start of the year, the key global indices are down, for both equities and bonds. As at last Friday, 17th October, the MSCI World (Equities) was down 40% for the year. As we discussed in this House less than two months ago, market volatility, coupled with slower global economic growth, have hurt most financial assets globally. The investments that constitute our reserves have inevitably been affected, like those of other global investors.

It is in the nature of investments that there will be market cycles, although the volatility this time is much more severe.

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However, we can ride through these cycles of upturns and downturns. I mentioned the reasons when the same question was last raised in this House. Let me reiterate them.

First, our reserves are invested with a long-term horizon. This avoids the need for our investment agencies to sell in panic in a market downturn. In fact, it puts them in a position to invest in good quality assets at prices that are attractive from a long-term perspective.

Second, our investments are well diversified across a wide range of assets and currencies, which has helped to mitigate risks to the overall portfolio.

Third, we have emphasised sound governance and proper risk management procedures in investments by GIC and Temasek.

Our diversified and long-term approach to managing our reserves has served us well. Both GIC and Temasek have so far delivered creditable long-term returns.

Sir, we will continue to focus on the long-term performance of our investments while ensuring that there are robust systems, structures and processes in place for sound and professional management of Singapore's reserves.

Ms Ellen Lee (Sembawang): Sir, instead of investing overseas long term and then suffering the volatility of the market, would the GIC consider investing in our local SMEs and our local entrepreneurs instead, particularly when we know that the economy is slowing down and the prospect is projected to be bleak?

Mrs Lim Hwee Hua: Sir, so far, the diversification has been across markets, across industries, across asset classes and across currencies, and this strategy has served us well. So, unless there are compelling reasons for us to depart from

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this long-term approach, the Ministry will not direct GIC or Temasek to change its portfolio philosophy.

Mr Low Thia Khiang (Hougang): Sir, I would like to ask the Senior Minister of State whether GIC and Temasek currently have sufficient or enough cash liquidity to take advantage of the US financial meltdown to invest further in order to place Singapore in a better position.

Mrs Lim Hwee Hua: Sir, precisely because of the philosophy that we have adopted, both GIC and Temasek are in a comfortable position to take advantage of any opportunities that may arise from the current downturn.