Singapore’s acquisitive Temasek is up to its old tricks again, buying high and selling low, as it emerged on Friday that the state-backed investment agency sold its 3 per cent stake in Bank of America in the first quarter of this year, suffering an estimated $3bn loss in the process.
Just earlier this week, Temasek bought some of BofA’s shares in China Construction Bank, adding to its existing near-6 per cent stake in CCB, in a consortium deal with Beijing-based buyout firm Hopu and China Life. That was part of what Reuters called a drive to refocus on emerging markets.
To be fair, Temasek never reckoned on ending up with a big chunk of BofA: it had invested in Merrill Lynch and other global banks during the early phase of the global financial crisis, but most with an emerging markets presence. After BofA bought Merrill at the beginning of the year, Temasek ended up converting its 13.7 per cent stake in Merrill into BofA stock.
At the time, its BofA stake was worth $2.6bn, or $13.7 a share; but it subsequently sold the shares for between $2.53 and $14.81 in the first quarter, according to Reuters, which estimates Temasek may have suffered a loss of more than $1bn on the share sale and a $2bn paper loss on the conversion ratio.
Temasek – which has been burned by some ill-timed investments last year (its portfolio fell 31 per cent between March and November 2008 to S$127bn, or $87bn, the FT reports) – is increasingly focusing on the Asian market and eyeing investments in Latin America and Russia.
Before this week’s CCB share purchase, it used some of the cash from its BofA stake sale to subscribe to rights issues of Asia-focused Standard Chartered, Singapore’s DBS and Indonesia’s Bank Danamon.
In a rare speech this week, Ho Ching, Temasek’s outgoing chief executive (and wife of Singapore’s prime minister Lee Hsien Loong), said the investment firm had debated whether to raise its long-term Asia exposure and add new exposures to other parts of the world. Asia and Singapore account for 70 per cent of Temasek’s portfolio, notes Reuters.
Clearly ahead of the October handover to incoming chief executive Chip Goodyear, former chief executive of BHP Billiton, the folks at Temasek are trying to get the house in order. And they’re not buying the “green shoots” hype emanating from the US and elsewhere.
As Song Seng Wun, chief executive of CIMB Research in Singapore, told Reuters: “It seems they feel the China growth story is better than the ‘green shoots’ of recovery in the US”.
Related links:
Temasek dumps BofA stake, focuses on emerging markets – Reuters
Temasek portfolio drops 31% – FT