LexisNexis(TM) Academic - Document
Financial Times (London, England)
September 2, 2005 Friday
London Edition 1
SECTION: COMPANIES ASIA-PACIFIC; Pg. 23
LENGTH: 723 words
HEADLINE: Temasek gambles on China Singapore state investment group is looking for high-growth assets, writes John Burton
BYLINE: By JOHN BURTON and ANDREW YEH
BODY:
Ho Ching, chief executive of Temasek Holdings, Singapore's state investment company, is in the middle of the biggest gamble since she took over in 2002 - a proposed investment of up to USDollars 6bn in two large Chinese state-owned banks.
Temasek has suddenly emerged as the leading foreign investor in China's financial sector, buying a stake in Bank of China and pledging to buy a minority holding in China Construction Bank, the second and third biggest banks.
The Chinese bank investments are part of a wider strategy by Temasek to expand the "external wing" of the city-state's economy by picking up high-growth Asian assets, particularly in banking and telecoms.
The BOC and CCB deals are the biggest overseas investments by Temasek, which had a total portfolio of about Dollars 54bn in March 2004, the latest data released by the secretive state group.
Temasek announced this week it would spend Dollars 3.1bn for 10 per cent of BoC before the bank's IPO next year, with plans to spend an extra Dollars 500m on shares once listed. The 10 per cent stake in CCB will cost it Dollars 2.4bn.
Ms Ho, wife of Singapore's prime minister Lee Hsien Loong, has said she wants to improve performance by investing in growth sectors. Temasek has reported annual returns of only 3 per cent in the past decade.
"Investments in Chinese banks may seem risky, but you only get higher returns when you accept higher risks," says Paul Coughlin, global head of corporate and government ratings at Standard & Poor's, the international ratings agency.
Within the next decade, the group aims to have two-thirds of its assets outside Singapore, which accounts for about half of its portfolio.
Until now, China has represented less than 5 per cent of its holdings, which some analysts believed reflected past poor investments by Singapore state companies in China in the 1990s.
Before this year, Temasek had stakes in several Chinese ports through its wholly owned subsidiary, PSA International. CapitaLand, a Temasek-owned company, has also been a keen investor in China's property market.
But Temasek has recently stepped up the pace of Chinese investments after hiring several bankers from US investment banks.
Recent Chinese deals have included buying 5 per cent of Minsheng Bank, a privately owned bank, and 24 per cent of Great Wall Airlines, a cargo carrier.
Temasek has been selling shares recently in several Singapore holdings, including CapitaLand and transport group SMRT, raising SDollars 1.3bn (USDollars 774m) that could be used to finance its Chinese foray.
Temasek's finances are strong enough to withstand any possible risks in China. It receives at least Dollars 2bn in dividends from its corporate holdings, including Singapore Airlines, SingTel and DBS Bank.
Although it has not yet needed to tap financial markets for funds, it has received top ratings from S&P and Moody's. Temasek's financial firepower has already created a network of banking stakes across Asia, with holdings in Indonesia, India, South Korea, Malaysia and Pakistan.
"Temasek has created a strong banking franchise across the region in spite of initial scepticism that it could do so," says Prabodh Agarwal, Singapore research head at CLSA. "All its banking investments have proved profitable." But he warns that China will prove a challenge. "First-wave foreign investors into Chinese banks will not make money or will only do so after five to 10 years. But Temasek believes the upside potential can be achieved sooner if banking operations and governance are improved."
Whether Temasek can influence the management of Chinese banks remains an open question because of its minority status, although it is expected to advise on corporate governance and technology upgrades.
David Marshall, managing director of Fitch Ratings in Hong Kong, says Temasek's BoC investment has a better chance at succeeding if it gains warrants for "downside protection". "It's a leap of faith in the Chinese government," he says of investing without such guarantees.
Temasek has been able to improve the performance of Bank Danamon and BII in Indonesia because it holds a controlling stake in both. Analysts believe Temasek also has to pursue a longer-term goal of integrating its individual bank holdings. That has led to speculation it may try to buy a regional bank.Additional reporting by Andrew Yeh
LOAD-DATE: September 1, 2005
September 2, 2005 Friday
London Edition 1
SECTION: COMPANIES ASIA-PACIFIC; Pg. 23
LENGTH: 723 words
HEADLINE: Temasek gambles on China Singapore state investment group is looking for high-growth assets, writes John Burton
BYLINE: By JOHN BURTON and ANDREW YEH
BODY:
Ho Ching, chief executive of Temasek Holdings, Singapore's state investment company, is in the middle of the biggest gamble since she took over in 2002 - a proposed investment of up to USDollars 6bn in two large Chinese state-owned banks.
Temasek has suddenly emerged as the leading foreign investor in China's financial sector, buying a stake in Bank of China and pledging to buy a minority holding in China Construction Bank, the second and third biggest banks.
The Chinese bank investments are part of a wider strategy by Temasek to expand the "external wing" of the city-state's economy by picking up high-growth Asian assets, particularly in banking and telecoms.
The BOC and CCB deals are the biggest overseas investments by Temasek, which had a total portfolio of about Dollars 54bn in March 2004, the latest data released by the secretive state group.
Temasek announced this week it would spend Dollars 3.1bn for 10 per cent of BoC before the bank's IPO next year, with plans to spend an extra Dollars 500m on shares once listed. The 10 per cent stake in CCB will cost it Dollars 2.4bn.
Ms Ho, wife of Singapore's prime minister Lee Hsien Loong, has said she wants to improve performance by investing in growth sectors. Temasek has reported annual returns of only 3 per cent in the past decade.
"Investments in Chinese banks may seem risky, but you only get higher returns when you accept higher risks," says Paul Coughlin, global head of corporate and government ratings at Standard & Poor's, the international ratings agency.
Within the next decade, the group aims to have two-thirds of its assets outside Singapore, which accounts for about half of its portfolio.
Until now, China has represented less than 5 per cent of its holdings, which some analysts believed reflected past poor investments by Singapore state companies in China in the 1990s.
Before this year, Temasek had stakes in several Chinese ports through its wholly owned subsidiary, PSA International. CapitaLand, a Temasek-owned company, has also been a keen investor in China's property market.
But Temasek has recently stepped up the pace of Chinese investments after hiring several bankers from US investment banks.
Recent Chinese deals have included buying 5 per cent of Minsheng Bank, a privately owned bank, and 24 per cent of Great Wall Airlines, a cargo carrier.
Temasek has been selling shares recently in several Singapore holdings, including CapitaLand and transport group SMRT, raising SDollars 1.3bn (USDollars 774m) that could be used to finance its Chinese foray.
Temasek's finances are strong enough to withstand any possible risks in China. It receives at least Dollars 2bn in dividends from its corporate holdings, including Singapore Airlines, SingTel and DBS Bank.
Although it has not yet needed to tap financial markets for funds, it has received top ratings from S&P and Moody's. Temasek's financial firepower has already created a network of banking stakes across Asia, with holdings in Indonesia, India, South Korea, Malaysia and Pakistan.
"Temasek has created a strong banking franchise across the region in spite of initial scepticism that it could do so," says Prabodh Agarwal, Singapore research head at CLSA. "All its banking investments have proved profitable." But he warns that China will prove a challenge. "First-wave foreign investors into Chinese banks will not make money or will only do so after five to 10 years. But Temasek believes the upside potential can be achieved sooner if banking operations and governance are improved."
Whether Temasek can influence the management of Chinese banks remains an open question because of its minority status, although it is expected to advise on corporate governance and technology upgrades.
David Marshall, managing director of Fitch Ratings in Hong Kong, says Temasek's BoC investment has a better chance at succeeding if it gains warrants for "downside protection". "It's a leap of faith in the Chinese government," he says of investing without such guarantees.
Temasek has been able to improve the performance of Bank Danamon and BII in Indonesia because it holds a controlling stake in both. Analysts believe Temasek also has to pursue a longer-term goal of integrating its individual bank holdings. That has led to speculation it may try to buy a regional bank.Additional reporting by Andrew Yeh
LOAD-DATE: September 1, 2005
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