Temasek Holdings Pte said the turmoil in Europe may result in a
market slump rivaling the 2008 global financial crisis, creating
opportunities for the Singapore state-owned investment company to
make deals.
Temasek, which managed S$193 billion ($150 billion) as of March
2011, may fund European companies expanding in growth markets like
Asia and Latin America, or form ventures with firms seeking mergers
or acquisitions, Chief Investment Officer Tan Chong Lee said in a
June 11 interview. Temasek is prepared to make “sizable” deals
topping S$1 billion, he said.
Enlarge image Temasek Holdings CIO Tan Chong
Lee
Temasek Holdings Pte. Chief Investment Officer Tan Chong Lee.
Photographer: Munshi Ahmed/Bloomberg
Enlarge image Temasek Holdings CIO Tan Chong
Lee
Temasek Holdings Pte. Chief Investment Officer Tan Chong Lee.
Photographer: Munshi Ahmed/Bloomberg
The MSCI World Index (MXWO) slumped 9
percent in May, its worst monthly performance in two years, as
Europe’s debt crisis intensified, the U.S. recovery showed signs of
losing steam and growth slowed in China and India. European
officials have tried to contain the situation as Spain sought a
bailout of 100 billion euros ($125 billion) for its banks and a
Greek vote this weekend may decide whether the country stays in the
euro zone.
“We do not discount the possibility that another severe round of
major dislocation could actually result from the current European
crisis,” said Tan, 50. “It’s hard to quantify or predict the
magnitude of the potential correction, but one would imagine that
there is no less reason why another major correction would not be
as bad or worse than the global financial crisis that we saw back
in 2008.”
The European Union’s construct has created “inherent
instability” in the system, which is unlikely to improve until
structural changes are made, Tan said at Temasek’s
headquarters.
Investment Proposals
Temasek is assessing investment proposals in areas it wants to
focus on, such as retail, luxury, technology, health care,
biotechnology and insurance, Tan said. These also fit its aim to
invest in markets with a rising middle-income population.
“Global markets are going to see a lot of volatility,” said
Catherine Yeung, Hong Kong-based investment director at Fidelity
Investment Management Ltd., which had $1.62 trillion of total
managed assets as of March. “It is important for investors to
search for those growth opportunities and many of those growth
opportunities lie in Asia Pacific.”
Investments in Europe and North America make up 8 percent of
Temasek’s assets, trailing assets in Singapore and other parts of
the Asia-Pacific region. Past European investments that exceeded $1
billion include its 2 percent stake in London-based Barclays Plc,
which it has sold, and 18 percent of Standard Chartered Plc (STAN),
making it the U.K. bank’s biggest shareholder.
‘Return Requirements’
“In this environment, we’re seeing sizable opportunities come
our way and we are carefully evaluating those opportunities,” said
Tan, who’s also considering smaller ventures. “We are currently net
cash, which means that we have the full flexibility to undertake
significant transactions provided it meets our return
requirements.”
Temasek’s assets slumped 30 percent to S$130 billion in the year
ended March 2009 amid the global financial crisis when it sold its
stake in Bank of America Corp. at a loss. The company’s holdings
rebounded to S$186 billion the following year, and reached S$193
billion at the end of March 2011, according to Temasek’s annual
reports.
Tan was hired in September from Bank of America’s Merrill Lynch
unit, where he was the Southeast Asia head of corporate and
investment banking. Tan is also Temasek’s co-head of the Americas
alongside Boon Sim, who joined as president of North America this
month from Credit Suisse Group AG. Sim was global head of mergers
and acquisitions at the Swiss bank.
Temasek, which is run by Chief Executive Officer Ho Ching, also
hired John Cryan, the former chief financial officer of
UBS AG (UBSN), as president for Europe in
January.
Holding Back
While Temasek plans to be “naturally cautious” with investments
amid the crisis, according to Tan, stock market volatility is
holding back others.
CSR Corp., China’s biggest trainmaker by
market value, is unlikely to act on proposed acquisitions in Europe
this year because of concerns about the region’s economy and the
future of its single currency, Chairman Zhao Xiaogang said in a
June 8 interview in Beijing.
“We don’t think it’s time to actually enter,” said Kelvin Tay,
chief investment strategist at UBS Wealth
Management in Singapore. “We are still advocating a cautious
stance. It takes years, if not decades for all these issues to be
completely resolved,” citing Europe’s competitiveness, trade unions
and unemployment.
Tan said Temasek’s holdings in financial services companies,
which made up 36 percent of its assets as of March 2011, will
continue to be an important part of its investments.
“Banks are a very good proxy for riding on the growth of a
particular economy or economies,” Tan said. “I don’t see us
diminishing or reducing our exposure in the financial services
space.”
Danamon Deal
Temasek made its biggest deal in more than a decade in April
with the pending sale of its 67 percent stake in PT Bank Danamon
Indonesia to DBS Group Holdings Ltd. (DBS),
Southeast Asia’s biggest bank. DBS will pay
for Temasek’s stake in the Indonesian bank with $4.9 billion of new
stock, increasing its share of the Singapore bank to 40.4 percent
from 29.5 percent.
The transaction, also the largest in the region’s banking
industry, faces headwinds as Indonesia threatens to restrict
foreign ownership of its lenders. Foreigners are currently allowed
to own 99 percent of an Indonesian bank.
In China, Temasek sold $2.48 billion of shares in Bank of China
Ltd. (398
and China
Construction Bank Corp. (939) in May, less than a month after
paying $2.3 billion for shares in Industrial & Commercial Bank
of China Ltd. Temasek, which continues to hold more than $17
billion in Chinese bank shares, said the recent sales were part of
a “rebalancing” after the investment in ICBC,
the world’s biggest bank by market value.
“We continue to believe in the long-term potential of China,”
Tan said.
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i cannot stand this.
