HO CHING STEPS DOWN

Change of Guard

Just after lunch yesterday, DJ News flashed an alert that an important announcement is pending 3.30pm. Immediately, the market forum went into overdrive with theories and rumours. Among them were big acquisitions by TH through Standard Chart and SIA losing 2 billion in fuel hedging. But none were even close to what was officially released.

At 4pm. The investing world got their truth. CEO Ho Ching will be stepping down and will be replaced by former CEO of BHP, Charles Goodyear. Then another round of rumours and theories for the reasons of the change of guard at such turbulent times begin to make its round. Of course, the market and the netizens are never short of.

Chairman Danabalan took pains to debunk the rumours that Ho Ching left not because of Temasek poor performance from the recent acquisition of Barclay, ML, Citi, Standard Chart and UBS. Ho Ching herself said that the change was planned long ago and that Temasek need new “energy”.

I do not know HC personally, except that she was a scholar and wife of our PM. Many times she was the target of pot-shots unfairly lobbed at her due to this relationship with the PM. This has kept her away from the limelight of media interviews and press conferences. That unfortunately denied Temasek the ability to effectively tell its side of the story. Temasek is the world 5th largest SWF. As it took the world stage recently when it bought huge stakes in multinationals, politicians from the developed west begin to place SWF under microscope, there is a real need to manage its public image and perception. This could be the reason why a foreign white man is asked to helm this $185B funds. Together with the 2nd in command, who is also white, will be in a better and easier position to manage the western media which are typically sceptical of Singapore.

Another reason in my opinion was more to do with domestic politics. As an early investor in troubled Merril Lynch, Standard Chart and Barclays Banks which now sit on paper loss of US$5B, US$3.2B and $4.6B respectively (source from The Edge). But these losses have to be balanced against the profit from Bank of China and CCB. This losing investment continues to bleed and the losses have yet to abate. Potentially, these losses can be explosive and become a nasty liability for the PM and it may be strategic move for this handover.It may also spare PM the unnecessary criticisms and embarrassment and allow him to concentrate his energy to deal with this economic crisis. This I think is a wise move.

Another reason I believe, could be a change in investment and portfolio philosophy. Temasek has been heavily invested in financial sector. Financial sector may have seen it best days and will no longer give superior returns in the future. Resources and commodities may be the future and now is the best time to make long term investment after the recent collapse of stock market. The ex-CEO of BHP brings with him all the credentials and inside knowledge in this sector. This will definite provide Temasek the edge and the confidence to move into this sector.

So much for my speculation.