SINGAPORE: An official from the Government of Singapore Investment Corp (GIC) said he expects more weakness in financial markets in the next 12-18 months, and recommended investors hold gold and other safe assets such as government bonds.

GIC, one of the world’s largest sovereign funds with an estimated US$200 billion-plus (RM740 billion-plus) in assets, has invested aggressively in troubled global lenders, picking up multi-billion dollar stakes in Citigroup and UBS in late 2007 and early 2008.

There is “systemic capital inadequacy globally”, and the world will probably see “three years of a very vicious downcycle”, GIC’s director of economics and strategy, Yeoh Lam Keong, told the Investment Management Association of Singapore conference yesterday.

“This is a very destructive process for assets,” Reuters quoted him as saying.

Yeoh, who said he was speaking in his personal capacity, showed a slide prepared by GIC that indicated global writedowns in the financial sector could reach US$3.8 trillion by 2013 and that only about 30% of the losses had been booked so far.

Yeoh suggested investors hold gold, sovereign bonds and currencies such as the Japanese yen, Chinese yuan and Canadian dollar.

He said he liked gold because governments were under pressure to cheapen their currencies to compensate for falling demand, and that some countries such as the United States and Britain would eventually be forced to monetise their debt by printing money.

“I would avoid these currencies like the plague,” he said in reference to the dollar and sterling.

Meanwhile, Bloomberg reported that Temasek Holding Pte, Singapore’s US$85 billion state-owned investment company, has sold its entire stake in China Minsheng Banking Corp.

Temasek began paring its holding in the second quarter of 2008 after the banking regulator said it could only own stakes in two Chinese lenders, it quoted two people familiar with the matter as saying.

Temasek also has stakes in China Construction Bank Corp and Bank of China Ltd.

Foreign financial firms including Bank of America Corp have sold stakes in Chinese lenders to repair balance sheets hobbled by losses and writedowns.

Temasek had 31% wiped from the value of its global portfolio in the eight months through November as slumping markets eroded the value of stakes in companies including Barclays Plc.

“The exit of Temasek won’t have any immediate impact on Minsheng’s operations as Temasek isn’t very hands-on,” said Liu Yinghua, a Shenzhen-based analyst at Ping An Securities Ltd.

Minsheng press officer Li Limin said Temasek is no longer among the bank’s 10 largest shareholders, declining to comment further.

Temasek bought 472 million shares, or a 4.55% stake, in Minsheng in October 2004 for about US$110 million. The holding was diluted to 3.26% last year after Minsheng raised 18.2 billion yuan (RM10.1 billion) selling additional shares, making Temasek the 10th-largest shareholder, exchange filings show.