Analysts predict Temasek and GIC to have negative returns in last fiscal year

The Chinese media reported today (1 Jul) that Temasek and GIC would likely be releasing their latest financial results for the last fiscal year in the coming 2 weeks.

It reported that analysts are predicting that both Temasek and GIC might be hitting negative returns this time.

In the case of Temasek Holdings, the consensus is that its total asset value would fall 2.5 to 5 per cent for the last FY.

The media cited that the Sino-US trade disputes and global economic slowdown as 2 main factors impacting the performance of Temasek and GIC.

However, not all investments are due to economic reasons.

Sharp drop in Bayer’s share price due to more than 10,000 pending lawsuits

Take for example, last year Temasek invested into German pharmaceutical company Bayer. In fact, Temasek put money into Bayer to help it acquire Monsanto, a U.S. company.

Bayer sold 3.6 per cent stake to Temasek for 3 billion euros at 96.77 euros per share. The money was used as part of Bayer’s plan to takeover Monsanto. Together with its existing holding in Bayer at the time, Temasek owned about 4 percent in Bayer after the transaction. By June 2018, with Temasek’s help, Bayer successfully acquired Monsanto to become the biggest seed and agricultural chemical maker in the world.

But soon after the investment, news emerged that Monsanto was being sued for its weed killer product, Roundup, in California. Last Aug, a California state court ruled that Roundup caused the terminal cancer of a former school groundskeeper. The jury found Monsanto had “acted with malice or oppression” and awarded the plaintiff US$289 million in damages. The damages were later reduced to US$78 million. Thereafter, more lawsuits appeared.

In a second case, Bayer lost again at a federal court in March this year. The jury found that the plaintiff was not warned about the herbicide’s alleged cancer risks and awarded him the amount of US$80 million. Presently, there are more than 10,000 lawsuits pending.

Not surprisingly, Bayer share price dropped. It has been steadily sinking since the first adverse verdict in the Roundup lawsuit was announced last August. Last Fri, Bayer’s share traded at 60.94 euros. From 96.77 to 60.94 euros, Temasek has lost at least close to 40 per cent from its original investment of 3 billion euros.

According to GIC’s website, the CPF Board invested Singaporeans’ CPF monies in special government bonds called the Special Singapore Government Securities (SSGS). GIC then manages these monies raised by the government and on behalf of the government. “So while the CPF monies are not directly transferred to GIC for management, one of the sources of funds for the Government’s assets managed by GIC is the proceeds from SSGS,” GIC said.

In any case, it remains to be seen what Temasek and GIC will be announcing in the coming 2 weeks.