Err! Ho Ching Quits as Temasek CEO in Surprise Move To Seek New Challenges (PM or President?)
Today I was greeted by the news that Ho Ching, PM Lee’s wife, was stepping down from her position as CEO and Executive Director of Temasek Holdings on October 1st. She will be replaced by the CEO of Temasek International, Dilhan Pillay Sandrasegara. Obviously she found her new role as an Influencer on Facebook far more interesting!
As readers of my blog will know I have been vociferous in raising questions about how she was appointed as well as why she has kept her job as CEO for seventeen years despite the huge losses sustained in 2008. Ho Ching’s main qualification appears to be being married to Lee Hsien Loong.
Temasek’s performance has also lagged the major markets in which it is invested, whether looking at twenty, ten or three year time periods. The underperformance is much starker over the most recent time periods. Over the last ten years to March 2020 the S&P500’s annualised rate of return (with dividends reinvested) has been 10.8% whereas Temasek’s has been 5% in US$. Over three years the S&P500 returned 5.8% annualised but Temasek could only manage 3%. And over one year Temasek lost 7% in US$ but the S&P only lost 3.8%. Over the longer term Temasek’s performance has been goosed by the injection of state companies like SingTel, Singapore Airlines and DBS into Temasek at very low book values and the big revaluation profits
Under Ho Ching’s leadership Temasek has also shifted more of its portfolio into unlisted markets, rising from 39% in 2015 to 48% in 2020. Since the global rise of private equity and unlisted startups valued in the billions was only just beginning in 2004 the proportion of unlisted assets in Temasek’s portfolio has likely more than doubled and that is a conservative estimate. China This makes performance much more difficult to measure as unlisted investments are by definition difficult to value. Despite Temasek’s statement that unlisted equity valuations are based on book values, this could still mean large hidden losses if the startup’s valuation subsequently drops.
Ho Ching also presided over a big shift of the portfolio into China. She may have been quite happy operating in opaque markets since lack of transparency could be the guiding principle of the Lee family and the PAP when it comes to Singaporeans. However Temasek (and GIC) show no signs that they understand the risks and rules of the game, as painfully illustrated yet again recently by the way both our sovereign wealth funds piled into an offshore entity that was supposed to be converted into shares in Ant Group when the financial services company was listed. After Jack Ma’s arrest and an effective state takeover of Ant, they are now locked into an offshore shell company with little hope of redeeming their investment which is now effectively at the whim of the Chinese Government. I will write more about this in a subsequent blog but in total Temasek and GIC appear to have blown close to US$1.3 billion on what looked like a surefire bet.
Not only has she lost money on ill-judged punts, Ho Ching has also inflicted severe reputational damage with this investment and others. Much of Ant Group’s profitability seems to have arisen from what is euphemistically termed “regulatory arbitrage”, i.e. evading regulations imposed on older firms in the space and thus lowering costs. Now that that the Chinese regulators have clamped down there is little likelihood that Ant can justify the hefty valuation premiums.
Then there are the bribery and corruption scandals in Brazil and elsewhere that Temasek companies Keppel and Sembawang became embroiled in culminating in a fine of US$422 million for Keppel Offshore and Marine in 2018, only because of a US crackdown led by the Justice Department. Even if Ho Ching did not know about the bribery she condoned a corporate culture in which bribery was not only the norm but something that was thought of as a clever way of doing business. The scandal suggests a tolerance for corruption among the PAP that reaches right to the top of Government.
No mention of Ho Ching’s record would be complete without the infamous Olam saga. After Carson Block’s Muddy Waters came out with a sell recommendation saying that the equity was worthless, Temasek mounted a short squeeze and then a buyout of the equity holders at an inflated price. Temasek already held a stake in Olam before Muddy Waters report but threw good money after bad in paying a premium for the equity when it would have been cheaper to take control of Olam through a debt restructuring or bankruptcy. One suspects that this was a sweetheart rescue deal for the owners of Olam who were lured to list in Singapore, no doubt through expensive tax giveaways and grants. Currently the stock trades at about 30% lower than the buyout price.
Despite the innumerable gaffes that would have got CEOs in the private sector fired many times over Ho Ching has kept her job for seventeen years and, most egregiously, her remuneration remains a state secret with Seat Warmer-In-Waiting Heng Swee Keat and Lawrence Wong arrogantly defending the Government’s right to keep from Singaporeans what she is paid and issuing POFMA notices to anyone guessing what her likely remuneration is but at the same time refusing to provide any facts. The most recent episode was when a Taiwanese news programme stated that she was earning $99 million a year. I have written extensively on the issue of Ho Ching’s remuneration and provide links to some of my articles below. The clearest indication that her earnings would be highly embarrassing to LHL and to the Government are the lengths it goes to to keep it secret, with hopelessly contradictory arguments that she works for a private company while using laws that are only supposed to be used to prevent the Government being brought into disrepute. Even if she conservatively only earns $50 million a year she and her husband will easily be billionaires many times over, even if they were not to start with.
But now Ho Ching is moving on. I very much doubt that she will be retiring. It seems likely that she will enter politics as a PAP Minister and then take the PM role when her husband finally steps down, overtaking Heng Swee Keat at the last minute. She can then hold the seat warm for her son Hongyi. Alternatively she may be intending to stand for the Presidency in 2023. Since her husband amended the rules to bar anyone from the private sector who had managed less than $500 million in assets, it has looked as though he was clearing the field for his wife, providing the same helping hand as he did by appointing her as head of Temasek in the first place and keeping her safely entrenched for seventeen years. I am sure that Singaporeans will be just as interested as I am to learn where Ho Ching will pop up next. I will stay tuned to her Facebook page waiting for announcements on the next stage of her glittering career.