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Temasek sees greater meltdown in credit crisis despite profit doubling
Singapore wealth fund Temasek warned of further contagion from the global credit crisis after it doubled its full-year profit by selling billions of dollars of assets.
- Reuters
- Published: 23:43 August 26, 2008
Singapore: Singapore wealth fund Temasek warned of further contagion from the global credit crisis after it doubled its full-year profit by selling billions of dollars of assets.
The fund, which poured more than $5 billion into Merrill Lynch in December, said it saw value in the banking industry, despite the US subprime disaster that has forced banks to write off more than $500 billion.
"The fallout of the credit crisis will continue to dampen the global economy over the next 24 months, with sharply escalated oil and food prices beginning to test inflation expectations," chairman S. Dhanabalan said in the firm's annual report.
But Temasek sees opportunities in financials and said it would not cap its investments in that sector, which grew to 40 per cent of its portfolio in the year to end-March from 38 per cent previously.
"The financial service industry is one we believe in," Manish Kejriwal, Temasek's senior managing director for investment, International and India, told reporters at its annual briefing yesterday. "It's a proxy to the economic growth."
"We recently concentrated on US and UK primarily because we see value," he added, referring to Tema-sek's purchase of a nine per cent stake in Merrill Lynch and a two per cent stake in Barclays last year. It also raised its stake in Standard Chartered to 19 per cent from 13 per cent.
However, Anshukant Taneja, an analyst who covers Temasek for ratings agency Standard & Poor's, warned the firm's large exposure to financials increased its vulnerability to unpredictable asset cycles and contagion.
"The investment environment is expected to remain challenging, with expectations of continued pressure on liquidity and possibly subdued trends in the equity markets," said Taneja, who rates Temasek 'AAA', the highest credit rating, partly because of its government ownership.
"This may impact Temasek's ability to divest its stake in various entities and manage its portfolio."
The company declined comment when asked whether it wanted to invest in US bank Lehman Brothers, which has been linked in reports to a possible stake sale to other big Asian financial institutions as it seeks to raise money and scale down its more than $60 billion of mortgage-related assets.
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