views

Singapore's GIC profits on Citi stake sale

SINGAPORE&rsquo;S sovereign wealth fund GIC has sold half of the nine per cent stake in Citigroup it acquired amid the banking crisis, booking a profit of $1.6bn (&pound;980m) on the back of the rally in the markets.<br /><br />GIC offloaded the stake after the conversion earlier this month of $6.8bn worth of its convertible preferred stock in the US bank, at $3.25 a share. <br /><br />Shares in the Wall Street bank have since risen to close at $4.43 on Monday and rose as high as $4.66 yesterday.<br /><br />And the fund&rsquo;s chief investment officer Ng Kok Song said it had also made an unrealised gain of $1.6bn on its remaining holding, bringing the total return on its investment to $3.2bn. <br /><br />GIC, which manages some $100bn in foreign exchange reserves, stressed that its decision to sell the stake did not mean that its confidence in the bank&rsquo;s future performance was on the wane.<br /><br />&ldquo;A stake below five per cent reflects GIC&rsquo;s goals and desire to be a portfolio investor,&rdquo; it said.<br /><br />&ldquo;GIC will continue its investment in Citigroup as we are confident of its long-term prospects.&rdquo;<br /><br />The fund&rsquo;s chairman and former prime minister of Singapore Lee Kuan Yew said last year that GIC wanted to continue its investment in Western firms, which includes $18bn in Citigroup and UBS, for as long as 30 years.<br /><br />However, despite Lee&rsquo;s vote of confidence, the sale is likely to be taken as a sign that the fund believes that Western banks are set for a new period of sliding share values, reversing recent market rallies.<br /><br />GIC fared a lot better with its investments in US and European firms than its smaller compatriot Temasek.<br /><br />That fund recorded a 66 per cent fall in full-year profits to the end of March last week, due to losses on the ill-timed sale of its stakes in Bank of America and Barclays.