Temasek may raise more cash amid pain from the West
Singapore state investor Temasek, sitting on paper losses of $1.2 billion for its investments in Merrill Lynch (MER.N: Quote, Profile, Research) and Barclays (BARC.L: Quote, Profile, Research), is expected to shed more assets and conserve cash to offset its exposure to the ailing western financial sector.
Analysts said the sovereign fund, which recently unloaded an Indonesian bank and a Singapore power producer, may choose to consolidate its hefty holdings in Chinese banks. Temasek last year was among the early big investors to call the top of the market, selling down part of its stakes in two big China lenders.
“We expect that increasingly investments will be funded out of sale of current investments. So as they continue to rebalance their portfolio there could be temporary or medium-term requirement for more resources,” said Anshukant Taneja, who covers Temasek as a credit analyst at Standard & Poor’s.
Temasek’s TEM.UL S$164 billion ($121 billion) portfolio is weighted towards the financial sector, with 38 percent of its holdings in either banks or financial services.
Taneja said that the large exposure could have a bearing on returns, but does not threaten its top credit ratings.
“There has been a higher volatility in the recent past and that could result in volatility in earnings with regard to Temasek’s portfolio,” he said cash advance. “This is a risk, but not as much to substantially affect their current ratings.”
Temasek, headed by Ho Ching, the wife of Singapore Prime Minister Lee Hsien Loong, joined other state funds from the Middle East and Asia to provide lifelines to U.S. and European banks stung by the collapse of the U.S. subprime mortgage market.
But Merrill shares have fallen 11 percent since Temasek invested $4.4 billion in the firm and Barclays’ stock price is down 38 percent since July when it raised 975 million pounds ($1.9 billion) from Temasek and 2.2 billion euro ($3.5 billion) from China Development Bank to fund a bid for ABN AMRO.