Page last updated at 13:29 GMT, Tuesday, 10 February 2009

Singapore wealth fund loses steam

Temesek Towers
Temasek's moved to reduce its holdings early in the credit crisis

The value of Singaporean sovereign wealth fund Temasek Holdings contracted last year as the economic downturn dented the value of its investments.

Temasek said its portfolio had shrunk 31% to 127 billion Singapore dollars (57.2bn; $84.7bn) in November 2008, down from S$185bn at the end of March.

The value of Temasek's investments in banks such as Merrill Lynch has declined due to the credit crunch.

Temasek bought 9% of Merrill Lynch in 2007 before its shares were delisted.

The country's other sovereign wealth fund, Government of Singapore Investment Corporation (GIC), has also seen the value of its stakes in banking concerns reduced.

"It's easy to say the acquisitions were done at the wrong price, but I believe Temasek and GIC took the risks based on their due diligence," said Amanah Asset Management chief executive, Scott Lim.

"The depth of the crisis is something we couldn't have anticipated."


Temasek had ploughed some US$5.9bn into Merrill Lynch and owned about 9% of the US company.

Merrill Lynch's shares plummeted 78% in value before it was eventually delisted and bought by Bank of America.

Temasek converted its Merrill stock and so now holds 189 million shares in Bank of America.

Despite the losses in foreign holdings, the government said it would not automatically increase investment in local firms, but would instead consider whether to establish another fund to prop up local companies.

The government also highlighted it had been quick to reduce its equity shares shortly after the credit crisis took hold, thereby limiting losses.

What strategy Temasek adopts in the future remains to be seen as chief executive Ho Ching - who is married to Singapore Prime Minister Lee Hsien Loong - last week announced she would step down after seven years with the fund.

In October she will be replaced by 51-year-old Chip Goodyear, a former BHP Billiton chief executive.

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