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17 May 2009

Singapore’s Temasek sheds stake in Bank of America

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Singapore’s state-owned investor Temasek Holdings Pte sold its 3.8 percent stake in Bank of America Corp. at a loss that may total $4.6 billion, as the company shifts bets from Wall Street to emerging markets, reported Bloomberg news.

The sale may have raised about $1.27 billion, based on the average price of Bank of America stock in the first quarter. The divestment was completed by March 31, according to a US filing. Temasek declined to comment on the price.

Temasek, whose investments shrank 31 percent in the eight months through November 30, raised its stake in China Construction Bank Corp. this week, and Chief Executive Officer Ho Ching said yesterday the fund would reduce exposure to developed economies.

Temasek had spent about $5.9 billion since 2007 buying shares in Merrill Lynch & Co., acquired by Bank of America on Jan. 1 after the stock slid 78 percent last year.

“The belief now is that the world is not so American- centric anymore,” said Melvyn Teo, associate professor of finance at the Singapore Management University. “It’s going to be driven more and more by the Chinese economy and consumer so might as well load up more on Chinese banks than American banks.”

The value of Temasek’s assets fell to S$127 billion ($87 billion) in the eight months to Nov. 30 as the credit crisis drove down the value of stakes in Merrill Lynch, Barclays Plc and Standard Chartered Plc. The drop in the portfolio tracked a 38 percent retreat in the MSCI World Index.

Ho, wife of Singapore Prime Minister Lee Hsien Loong, drove an expansion outside Singapore and increased financial assets to 40 percent of the company’s portfolio.

Charles ‘Chip’ Goodyear, the 51-year-old former head of BHP Billiton Ltd. who oversaw a fourfold increase in the company’s stock during his almost five- year tenure as CEO, will replace Ho in October.

A Form 13F filing to the U.S. Securities and Exchange Commission yesterday from Temasek indicates that the fund no longer held shares in Bank of America or Merrill Lynch as of March 31. An earlier filing showed that the Singapore firm owned 219.7 million Merrill Lynch shares at the end of 2008.

At the average price of $6.73 for the first quarter, the stake would have been valued at $1.27 billion. The sale would have been worth $2.14 billion at yesterday’s closing price.

Since the end of March, when Temasek completed the sale, Bank of America has risen 66 percent. The stock dropped 52 percent in the first quarter.

Temasek confirmed it sold its Bank of America shares in an e-mailed response to Bloomberg News queries today. The company declined to say how much it sold the stake for or when the sale was conducted. Mark Tsang, a Hong Kong spokesman at Bank of America, declined to comment.

Temasek was founded in 1974 to foster development of the island’s banks, airlines and ports, and remains the biggest shareholder of six of the 10 biggest Singapore companies by market value. It owns shares of the island’s biggest bank and its largest telephone company.

Temasek’s investments in Asia include Bank of China Ltd. and ICICI Bank Ltd., India’s No. 2 lender.

“We’ve been very heavily overweight in Asia for some years now and leery of the Western financial institutions because Asia is where the growth is at,” said Hugh Young, managing director at Aberdeen Asset Management Plc, which has about $30 billion of Asian assets.






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