It seems to be SWF week, with the deals flying thick and fast, though thanks to Temasek, the Singapore investment company, some of the current activity focuses on the selling-off of stakes.
Temasek on Thursday made the third sale in a week of holdings in a Chinese company, selling more than half its 5.7 per cent stake in Hong Kong-listed China Cosco, Asia’s biggest container shipping group, for about $275m. The sale brought Temasek’s total divestment this week to $1.1bn – a lucrative week’s work that has fanned speculation that it is either calling the top of China’s overheated equity market, or is preparing another interesting investment elsewhere.
The FT reports that Temasek described its multiple transactions as part of its “ongoing rebalancing of the portfolio against new opportunities”.
Perhaps it is a bit of both, suggest some well informed observers. Definitely the rapid series of share disposals this week suggests that Temasek wants to take profits from its well-timed Chinese investments. The Cosco stake sale followed Temasek’s disposal of shares in two big Chinese banks, Bank of China (of which Temasek sold $575m worth of shares) and China Construction Bank (of which it sold $255m worth of stock), whose share prices have soared since the Singapore agency bought initial stakes ahead of their IPOs.
One person familiar with the bank share sales told the FT that Temasek remained optimistic about “the future health of the banking sector in China”. Indeed, the share disposals represented only a very small percentage of Temasek’s total holdings in the two banks.
However, some analysts say that Temasek may have anticipated a dip in the share price of Chinese banks in the near term after a healthy rise in the past two years, which has seen Temasek’s investment in CCB more than tripled. Certainly there’s more talk in Asian markets now about whether China stocks have peaked.
Cosco shares, for example, have rallied a staggering 465 per cent so far this year alone, despite the fact that their price has come off 28 per cent from its all-time high in late October, according to financeasia.com.
Now, however, analysts are predicting that a boom in global shipping rates could ease next year in response to the economic downturn in the US, which could hit Cosco’s earnings. Temasek bought into the company during its IPO in June 2005 at a price of HK$4.25 per share and sold for HK$26.75 a piece on Thursday. It has been reducing its holdings gradually through sales in the market.
Interestingly, news emerged Thursday that China mainland regulators had approved Cosco’s plan to sell approximately $2.2bn worth of shares to its parent company and another $800m to a small group of institutional investors to help fund the acquisition of dry-bulk ships, reports financeasia, driving Cosco’s share price up 9.9 per cent to HK$28.35.
So now, regional markets are watching Temasek to see if its next big investment will be in Asia. Despite an investment portfolio valued at about $108bn, only about $15bn has been invested in North Asia (China, Taiwan and Korea), according to its website. Earlier this month, Temasek signed a concrete agreement to buy an 8.3 per cent stake in China Eastern Airlines for $315m. Singapore Airlines, in which Temasek holds a controlling 55 per cent stake, already owns 15.7 per cent of China Eastern, notes financeasia.
Financial services form the biggest investment sector for Temasek, accounting for 38 per cent of its $108bn portfolio, and it may have decided to diversify its holdings into other industries, including transport.