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Thread: GIC says world could be facing worst recession in 30 years

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    Default GIC says world could be facing worst recession in 30 years

    GIC says world could be facing worst recession in 30 years

    By Ng Baoying, Channel NewsAsia | Posted: 21 April 2008 1311 hrs


    SINGAPORE: The world could be facing its worst recession in 30 years, said Deputy Chairman and Executive Director of the Government of Singapore Investment Corp (GIC) Dr Tony Tan.

    He shared this view with over 500 GIC staff at a conference on Monday.

    "The financial contagion has now spread beyond US shores, increasing the likelihood of a global financial crisis and recession. We could be facing a recession which is longer, deeper and wider than any recession that we have encountered in the last 30 years," he said.

    Dr Tan added that this could be mitigated if timely actions are taken by policymakers around the world, boosting both markets and investor sentiment.

    If this does not happen within the next three to four months, it will be up to the markets to work out current problems, and this is expected to be a long, painful and drawn-out process.

    He said: "What is clear is that the financial and investment markets will be extremely nervous and volatile over the next one or two years."

    While that means GIC's multi-billion-dollar investments in UBS and Citigroup remain shaky in the short term, Dr Tan pointed out that these are long-term investments and they are expected to give good returns when markets stabilise and economic conditions return to normal levels.

    GIC invested US$10.8 billion in UBS in December last year and US$6.88 billion in Citigroup this January.

    At the staff conference, GIC also unveiled three new group committees – the Group Management Committee, the Group Investment Committee, and the Group Risk Committee.

    The Group Management Committee, chaired by GIC's Group Managing Director Lim Siong Guan, will address and discuss organisational issues of the group.

    The Group Investment Committee will be chaired by Group Chief Investment Officer Ng Kok Song. It will develop and implement asset allocation policies and investment strategies at the group level. It will also review risk and performance of asset classes regularly.

    Chief Risk Officer Sung Cheng Chih will chair the Group Risk Committee which will oversee and guide the development and implementation of risk management policies.

    These committees will report to an executive committee chaired by Dr Tan.

    "This management structure enables GIC to have the group-wide oversight on our business operations, investments and risks while giving sufficient autonomy to our investment subsidiaries so that they can respond in a timely fashion to changes in investment circumstances," said Dr Tan.

    Analysts said this is a natural move as companies around the world brace themselves for a rocky ride ahead.

    GIC's investments are closely watched as the fund is seen as one of the largest sovereign wealth funds in the world.

    It is estimated to have some US$330 billion in assets under management, behind Abu Dhabi Investment Authority and Norway's Government Pension Fund.


    - CNA/so

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    Default Re: GIC says world could be facing worst recession in 30 years

    April 21, 2008

    World may face deepest recession in 30 years

    GIC's deputy chairman Tony Tan warns of its biggest challenge yet

    By Bryan Lee, Economics Correspondent


    THE world could be facing its worst recession in three decades but governments can lessen the effects of the downturn if they act decisively within the next three to four months.

    The warning came from the deputy chairman of the Government of Singapore Investment Corp (GIC), Dr Tony Tan, who urged policymakers to take strong action to stabilise investment markets and sentiment amid the extreme uncertainty surrounding the global economy.

    'We could be facing a recession which is longer, deeper and wider than any recession that we have encountered in the last 30 years,' he said on Monday.

    'The next few years may well be among the most challenging years for GIC since our establishment in 1981.'

    As for GIC's recent investments into global banks UBS and Citigroup, Dr Tan said these long-term investments will 'give us good returns when markets stabilise and economic conditions return to more normal levels'.

    The world economy and its financial markets are in turmoil, sparked off by a mortgage crisis in the United States that is still unfolding.

    The crisis of confidence has led central banks, especially the US Federal Reserve, to intervene in unprecedented ways to avert a seizure in the world's banking system.

    Dr Tan told about 500 staff at GIC's first annual staff conference: 'The prospects for the US economy and possibly even the world economy are fraught with considerable downside risks.'

    He warned that financial markets will be 'extremely nervous and volatile over the next one to two years'.

    But the pain can be reduced and shortened if policymakers around the world act swiftly, he said. If so, 'investment markets and sentiments can turn around sharply'.

    Read the full report in Tuesday's edition of The Straits Times.

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    Default Re: GIC says world could be facing worst recession in 30 years

    Published April 22, 2008

    Act fast or face deep recession: Tony Tan

    World could see worst recession in 30 years unless policymakers intervene urgently

    By MICHELLE QUAH


    (SINGAPORE) The global economy will run into even more turbulence if policy makers don't act quickly and decisively to ease the credit crunch spilling over from the United States, says the Government of Singapore Investment Corp (GIC).

    But the sovereign wealth fund is standing by its substantial investments in UBS and Citigroup after the sub-prime crisis ravaged the two mega banks.

    Speaking to some 1,000 employees at the inaugural GIC Staff Conference yesterday, GIC deputy chairman and executive director Tony Tan warned that the world may face a recession 'longer, deeper and wider than any we have encountered in the past 30 years'.

    'We are entering a period of extreme uncertainty in the world economy and global financial markets. As banks continue to de-leverage, cutting their lending activities and causing a contraction in credit supply, the prospects for the US economy - and possibly the world economy - are fraught with downside risks.'

    But Dr Tan believes the economic downturn can be mitigated if the authorities in the US and elsewhere take decisive and timely action. 'If policymakers respond strongly and appropriately, investment markets and sentiments can turn around sharply.

    'However, if such actions by the authorities are not taken within the next 3-4 months, it will be left to the market forces of supply and demand to stabilise the US housing market before we can see the light at the end of the tunnel. This will be a considerably more painful and long-drawn process.'

    Despite the uncertainty, GIC is standing by its decision to invest billions of dollars in troubled banks UBS and Citigroup.

    'We regard our investments in UBS and Citicorp as long-term investments that will give us good returns when markets stabilise and economic conditions return to more normal levels,' Dr Tan said.

    GIC pumped 11 billion Swiss francs (S$14.7 billion) into UBS last December via a convertible bond issue that would eventually give it a stake in the bank. It has also not ruled out injecting more cash into UBS, which is looking to raise 15 billion Swiss francs through a rights issue, after reporting a second straight quarterly loss this month. GIC has said that it would examine the terms of the rights issue before deciding.

    GIC also invested US$6.88 billion in Citigroup in January this year through a private offering of convertible preferred securities.

    Dr Tan yesterday reiterated that GIC was able to make such investments because it was well prepared for the current credit crisis.

    'We had moved to a more conservative posture in our portfolio by liquidating a portion of our equity holdings in the third quarter of 2007 and moving into cash - a measure we had not taken for quite some time. This provided us the liquidity to make substantial investments in UBS and Citicorp when these opportunities arose.'

    He added, however, that financial and investment markets would be nervous and volatile over the next 1-2 years.

    'Instead of the rising tide that broadly benefited financial and investment markets for the past 10-20 years, we are now facing choppy seas that could engulf the broader economy globally. Policymakers, business managers and investors will require fortitude and nimbleness to navigate safely through the turbulence.'

    Still, he expressed optimism for GIC's future. 'Working together as a team and with the right policies, we will successfully navigate the treacherous currents that lie ahead with sufficient ballast to be able to take advantage of opportunities as they arise. When this turbulent period is over, I am confident that GIC will emerge stronger and more resilient and take its place as one of the most competent and respected investment organisations in the world.'

    Dr Tan's speech yesterday to staff and the media, at Swissotel The Stamford, is seen as part of GIC's efforts to be more open about its investments. Set up in 1981 to manage Singapore's foreign reserves, the company is not required to give the same level of detail about its activities as a publicly listed company. But it has made overtures in recent months to be more transparent, without compromising its competitiveness.

    GIC is the world's third- largest sovereign wealth fund, with US$330 billion in assets under management, according to Morgan Stanley in February. It ranks behind the Abu Dhabi Investment Authority with US$875 billion and Norway's Government Pension Fund with US$380 billion.

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