It could have lost US$3b on the deal, sources say; focus shifts back to Asia
By SIOW LI SEN
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TEMASEK Holdings has cut its losses on Bank of America (BOA). The Singapore investment agency has sold its 3 per cent stake in the bank, resulting in a loss of about US$3 billion as it renews its focus back home and on the region.
'We have divested our shares in Bank of America,' a Temasek spokeswoman said yesterday.
A source said that Temasek took a hit of about US$3 billion from the divestment, which was done in several tranches in the first quarter of this year when BOA shares ranged between US$2.53 and US$14.81.
Temasek invested a total of US$5.9 billion for a 14 per cent stake in Merrill Lynch since December 2007 before Merrill was taken over by BOA on Jan 1 this year.
One analyst said that selling BOA was part of spring cleaning ahead of Charles Goodyear taking over as Temasek's new chief executive in October. 'Temasek has done a classic switch, from its disastrous (BOA) investment to Chinese banks,' said the analyst. Temasek this week bought more shares of China Construction Bank, raising its stake to almost 7 per cent from 6.1 per cent. Coincidentally, the seller was BOA - which regulators said needs to raise US$34 billion in capital following recent stress tests.
Since the end of last December, Temasek has pumped more money via rights issues into Standard Chartered Plc, DBS Group Holdings, CapitaLand and Indonesia's Bank Danamon.
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On Tuesday, outgoing chief executive Ho Ching said Temasek is 'increasingly more confident of Asia's future'.
Temasek has decided to add more exposure to other regions as well and has adjusted to a 10:20:30:40 portfolio mix, she said. Investments in Latin America, Russia and Africa will now make up 10 per cent, OECD 20 per cent, Singapore 30 per cent, and the rest of Asia 40 per cent.
Ms Ho was speaking to Junior Pyramid, a club which holds talks for civil servants and business people.
Previously, while not set in stone, the mix that Temasek had broadly aimed for was 30:30:30 for Singapore, OECD and the rest of Asia. As at March 31, 2008, Temasek's exposure to Singapore, OECD and the rest of Asia was 33:23:41.
Some observers say Temasek's rebalancing of its portfolio was expected, given the much faster growth of Asia, especially China. 'Seems sensible - China's growth should be a lot stronger than many countries,' said Hugh Young, chief executive of the Asia-Pacific arm of Aberdeen Asset Management.
He said that the balance sheets of Asian companies are stronger and a refocus on Asia plays to Temasek's strength - it knows the region well. 'What they were doing in American banks I don't know,' said Mr Young.
In February, when questioned in Parliament about losses incurred by Temasek and the Government of Singapore Investment Corporation (GIC), the government said both were long-term investors.
Senior Minister of State for Finance Lim Hwee Hua said the two state-owned companies are long-term investors and the government is confident they will continue to deliver good long-term returns.
Temasek's net portfolio value dropped 31 per cent between March 31 and Nov 30 last year, from S$185 billion to S$127 billion.
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