Singapore’s Sovereign Wealth Fund Dumps Stake In Olympus

November 13, 2011Investingby EW News Desk Team


The Government of Singapore Investment Corporation Pte. Ltd. (GIC), Singapore’s biggest state investor, has sold off nearly all of its shares in troubled Japanese camera and medical device maker Olympus Corp. – becoming the first major shareholder to have dumped its stake in the company amidst an accounting scandal that has seen Olympus’s market value drop by more than $6.5 billion since mid-October.

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“GIC disposed of almost all of its investments on first suspicion of possible wrongdoing in Olympus,” said GIC in a rare public statement issued last Saturday, as quoted by Reuters.

The world’s sixth largest sovereign wealth fund added that, “the majority of the investment was made in the midst of the global financial crisis,” and that "it currently has only an insignificant holding under a portfolio managed by an external fund manager".

According to the last Olympus annual report, GIC held a 2.17 percent stake in the company as of March this year, making them the company’s 10th largest shareholder. While GIC may have issued its statement in response to continued speculation over its potential losses, it refused to divulge details in regards to any of its shares transactions.

“Ever since the story broke and the unraveling of the extent of the fraud and cover-up of the company, there has always been increasing risk of the viability of the company,” said Song Seng Wun, a Singapore-based economist at CIMB Research, to Bloomberg BusinessWeek. “Rather than take the risk, GIC's management may have decided to bite the bullet.”

GIC’s investments has come under greater scrutiny in recent years, after news emerged that the fund had suffered $7.4 billion worth of paper losses in the aftermath of the UBS trader scandal, while also seeing unrealised losses from its investment in Citigroup Inc.

In its annual report in July this year, the fund claimed that it had boosted investments in emerging economies in order to tap higher returns, while cutting back from investments in Europe and the US. Emerging-market stocks made up 15 percent of its holdings this year as compared to 10 percent from a year earlier, while those in developed economies fell to 34 percent from 41 percent. 

The fund also warned earlier in the year that investment risk had gone up due to the increased market volatility, particularly in Europe and the US. 

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