Singapore’s Temasek Holdings Pte has told Standard & Poor’s in 29 pages why it shouldn’t mess with the state-owned investor’s AAA rating.
Temasek, which managed S$223 billion ($166 billion) of assets as of last March, said the rating firm’s proposed new rules for grading investment holding companies lump Singapore with riskier nations such as Greece and Jamaica, according to a Feb. 2 response to the changes, Bloomberg reported.
S&P’s new criteria take into account the firms’ lack of direct ownership of assets, the challenges they face when selling in illiquid markets and volatility of assets they hold.
Part of S&P’s proposal groups Singapore, which has had a AAA rating for 20 years, alongside Greece, a nation that may run out of cash this month. While Temasek would probably still enjoy the government’s top-grade overall rating, a weaker risk profile would be unwelcome at the company which has been considering offering bonds to individuals in Singapore.
Temasek dollar bonds due 2019 yielded 39 basis points more than U.S. Treasuries on Thursday and its credit-default swaps were at 38.7, compared with 35.5 for Australia.
Four Baskets
S&P in November published proposed new criteria for assessing credit risk at investment holding companies, or IHCs, defined as firms holding equity stakes across at least three sectors. The ratings company asked for feedback from affected parties by Jan. 30.
The new framework grades IHCs’ asset liquidity by splitting their main countries of operation into four baskets, based on a 30-year history of those nations’ share market swings, according to Temasek. Singapore falls into the third basket with markets including Hong Kong, Saudi Arabia and Cyprus. The measure should instead “be assessed based on the number of days needed to divest assets” on those exchanges, said Temasek.
“With its statement, Temasek is indirectly defending the standing of Singapore as a financial center,” Sven Behrendt, a managing director at Geneva-based GeoEconomica, which researches sovereign wealth funds, said in a Feb. 4 phone interview. “It’s understandable to me that Temasek doesn’t want the country to be put in the same category as Greece, Jamaica and Trinidad and Tobago.”
Temasek had 31 percent of its assets in Singapore as of March 31, according to its last annual report published in July. Investments in the rest of Asia stood at 41 percent and those in North America, Europe, Australia and New Zealand at 24 percent. About 70 percent of its assets were listed.
The firm’s biggest holdings include a 52 percent stake in Singapore Telecommunications Ltd., valued at $25 billion, data compiled by Bloomberg show. It owns a 6 percent stake in China Construction Bank Corp., valued at $11.6 billion, and 29 percent of DBS Group Holdings Ltd., valued at $10.4 billion.
