The confluence of a US housing bubble correction, the underpricing of risks by lenders and financial institutions, and the ensuing credit crisis led to the sudden demise of Bear Stearns in the US towards the end of March 2008. The shock failure of Wall Street’s fifth largest broker-dealer illustrates the kind of massive adjustments needed to deal with the global credit crisis, with bold and innovative measures by the US authorities to stem a dangerous systemic failure.

For the last two years, we have been concerned over the prospects of a major correction, but did not anticipate the speed and depth of the dislocation. A total of US$400 billion was written off by banks around the world in the space of one year since June 2007. Its epicentre in the capital of global finance, New York, also surprised us.

The fallout of the credit crisis affected markets worldwide, and will continue to dampen the global economy over the next 24 months. In addition, sharply escalated oil and food prices are beginning to test inflation expectations.

We had a busy year, with some S$32 billion of new investments and S$17 billion of divestments, compared to S$16 billion and S$5 billion respectively the previous year. On a gross basis, we made just under S$17 billion of investments in Asian economies, and S$15 billion outside Asia.

For the first time, our net investments for the year outside Asia exceeded our net investments in Asia, with S$10 billion or 68% outside Asia and a balance of S$5 billion or 32% in Asia. In the previous fi ve years, we made a total net investment of S$26 billion in Asia, and only S$1 billion into non-Asian economies.

Group net profit doubled from the year before to S$18 billion on the back of healthy realised gains from our divestments as well as the strong operating performance of our blue chip portfolio companies.