GIC trims Citi stake to below 5%; reaps $1.6 bn

GIC trims Citi stake to below 5%; reaps $1.6 bn

Singapore: Singapore’s largest sovereign wealth fund GIC said on Tuesday it had halved its stake in Citigroup to below 5%, making a profit of $1.6 billion as global equity markets rebound.

The stake sale came after Singapore’s smaller fund Temasek Holdings lost an estimated over $4 billion in Bank of America-Merrill Lynch and Barclays in hasty exits around the start of 2009.

Analysts said GIC, also known as the Government of Singapore Investment Corp, took advantage of a rally in world stocks to take some money off the table and the sale suggested the fund may have some concerns about the outlook for global banks.

“Perhaps timings wise GIC benefited from the rally," said Song Seng Wun, an economist at CIMB.

“The sale also reflects underlying concerns that although global institutions may have seen their darkest days, there could still be uncertainty ahead as OECD countries in particular could see patchy growth as a result of the recession," he said.

From late 2007, GIC plouged billions of dollars into Citigroup and UBS and like other sovereign funds, had suffered initial losses in battered global banks as the financial crisis hit companies.

Ng Kok Song, group chief investment officer of GIC, which manages an estimated $200 billion-plus in assets, said the fund realized a profit of $1.6 billion from the sale of Citigroup shares.

The Singapore investor had a profit including unrealized gains of about $3.2 billion based on Citigroup’s closing price of $4.43 on 21 September, he said.

On 11 September, GIC exchanged its $6.88 billion holding of Citigroup convertible preferred stock into ordinary shares at $3.25 a share as part of a rescue package, gaining in the process an over 9% stake in the US bank.

“A stake below 5% reflects GIC’s goals and desire to be a portfolio investor," it said in a statement. “GIC will continue its investment in Citigroup as we are confident of its long-term prospects."