SINGAPORE'S RESERVES AND INVESTMENTS

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SINGAPORE'S RESERVES AND INVESTMENTS: 4.

Ms Eunice Elizabeth Olsen asked the Minister for Finance whether the global market turmoil is putting our reserves and investments at risk.

The Senior Minister of State for Finance (Mrs Lim Hwee Hua) (for the Minister for Finance): Ms Eunice Olsen asked whether the global market turmoil is putting our reserves and investments at risk.

Slower global economic growth, coupled with the financial crises in US and Europe, has hurt most financial assets globally. Since the start of the year, most

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of the key global indices are down, for both equities and bonds. The MSCI World (Equities) is down 15%. This has inevitably affected the investments that constitute our reserves, like it has for other global investors. However, our investment managers had actually taken some precautionary measures early in the downturn. This has helped to mitigate the risks to the overall investment portfolio during this downturn.

Sir, we have to expect global markets to remain volatile, until the risks arising from slower growth, higher inflation and financial stresses subside. However, we can ride through the cycles of upturns and downturns in the financial markets.

Let me explain why we are able to do this. First, because our reserves are invested with a long-term horizon. This long-term orientation will keep us from selling or having to sell in panic in a market downturn. The downturns also offer opportunities for our agencies 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 array of assets and currencies, which help to mitigate risks to the overall portfolio. Third, we require sound governance and proper risk management procedures in investments by both GIC and Temasek.

Ms Eunice Elizabeth Olsen (Nominated Member): I thank the Senior Minister of State for her reply. Can I just ask if these are long-term investments, does that mean that MOF only asks questions as a shareholder years after the investments are made?

Mrs Lim Hwee Hua: Both the GIC and Temasek make regular reports to MOF as a shareholder. So at these reporting sessions, the performance to the point of reporting would always be taken into

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consideration. So we would not wait till a long period after the investments have been made.

Ms Eunice Elizabeth Olsen: Sir, I understand that Temasek has gained a record profit of $18 billion, but that was for the financial year ending 31st March 2008. However, the shareholder returns by market value fell to 7% from 27% a year ago. My question is: does MOF have as much confidence in our investments this year?

Mrs Lim Hwee Hua: Sir, what Ms Eunice Olsen has highlighted is precisely the reason we are able to take and we should continue to take a long-term perspective. Government is not in a better position than Temasek and GIC to assess these investments and Government has entrusted both agencies to undertake these long-term investments because they are better placed to do this. As I have said earlier on, the performance of both agencies will be assessed on a regular basis but the monitoring measures would be done on a frequent basis, not on a long-term perspective.