More money lost via Temasek

Temasek Holdings has once again taken huge money losing positions (via many sub-hedge funds) in ‘they think it’s stable stocks to ride on China’s economic growth’:

Source: Bloomberg

Temasek Holdings Pte, the Singapore state-owned investment company, is seeking to raise about HK$28 billion ($3.6 billion) by selling stakes in China Construction Bank Corp. (939) and Bank of China Ltd. (3988), two of the country’s three biggest banks.

The Singapore-based investment company is selling about HK$18.7 billion of shares in Bank of China and about HK$9.3 billion in an offering of China Construction Bank stock, according to term sheets obtained by Bloomberg News.

Shares of China’s four biggest banks fell in Hong Kong trading today after Moody’s Investors Service said banks’ loans to local governments may exceed official estimates by more than 3.5 trillion yuan ($540 billion) more than official estimates and the credit outlook for the industry could decline.

The extra liabilities, coming on top of the national audit office’s findings last week of 10.7 trillion yuan in local government debt, may fuel concern that banks will be unable to absorb losses on defaults should property prices drop.

Bank of China shares slid 0.3 percent to HK$3.86 in Hong Kong today while China Construction Bank dropped 1.2 percent to HK$6.48. Industrial & Commercial Bank of China (1398) Ltd., the world’s most profitable bank, fell 0.5 percent to HK$5.93.

Morgan Stanley (MS) is managing both sales, the terms show. Jeffrey Fang, a spokesman for Temasek, declined to comment.

2006 Investment

Temasek’s Fullerton Financial Holdings Pte. Ltd. unit is offering about 5.2 billion shares in Bank of China for HK$3.60 to HK$3.67 each, according to a term sheet. That’s as much as 6.7 percent less than today’s closing price.

Temasek owned about 10.5 billion shares, or 12.5 percent, of Hong Kong-listed Bank of China, according to a Dec. 31 filing. The fund paid about $1.5 billion for a five percent stake in the lender in 2006.

Cairnhill Investments (Mauritius) Pte. Ltd. and Crescent Investments (Mauritius) Pte. Ltd., both controlled by Temasek, are also selling about 1.5 billion shares in China Construction Bank for HK$6.22 to HK$6.35 each. The Singapore fund holds seven percent, or 16.9 billion shares, of China Construction Bank, according to company filings.

Temasek, set up in 1974, bought $1 billion of stock in China Construction Bank’s initial public offering in 2005. It also purchased an undisclosed stake in the Chinese lender from China SAFE Investment Ltd. the same year.

To contact the reporter on this story: Zijing Wu in London at zwu17@bloomberg.net Cathy Chan in Hong Kong at kchan14@bloomberg.net.

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This is obviously a desperate move to dispose off questionable chinese national banks with high links with a corrupt chinese government. It’s appalling how the Financial Crisis had not taught the two megamoths GIC and Temasek that bank stocks are not exactly the best stocks to own. And they obviously takes up very risky positions (looking at how Temasek can be purchasing the same stocks via 2 other hedge funds). So who are the management of Temasek accountable to at the end of the day? The citizens deserve a clear answer and some responsibilities taken.

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  1. July 6, 2011 at 1:04 am

    Do you have more details on the overall transactions? i.e., acquisition costs vs. proceed? Your article only show half of the story. A quick calculation show a good profit from the above transactions.

  2. peter
    July 6, 2011 at 3:18 am

    Dude, they made a handsome profit in this trade.. LOL. You need to learn some finance?

    • July 6, 2011 at 4:09 pm

      Hi peter & ncb, yes you are right, I apologize for my oversight.

  3. xtrocious
    July 6, 2011 at 4:06 am

    Accountability? Nope, don’t think so…

    • July 6, 2011 at 4:11 pm

      Hi xtrocious, I would like to clarify that I had wrongfully accused Temasek for losing money in this investment.

  4. br
    July 7, 2011 at 2:50 am

    This investment seems to have been incredibly profitable!! In fact, if my math is not wrong it more than makes up for the ML/Barcap losses.

    Anyone have the numbers on the comparison?

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