Hong Kong: Singapore’s Temasek Holdings Pte Ltd, like other Asian and West Asian sovereign wealth funds, is digging for deals in mining and oil, as it licks its wounds from financial sector investments that have soured in a global crisis.
The state investor is eyeing “aggressively sized” resource assets and could do a deal in the $5 billion range, a source familiar with the situation said, declining to be identified due to the sensitive nature of such deals.
Energy and resources make up just 5% of Temasek’s portfolio, worth $84 billion at end-November. The portfolio, bulging with banks such as Standard Chartered Plc. and Bank of America Corp., slid 31% between March and November. Investments in Merrill Lynch and Co. Inc. and other financials—which account for 40% of its assets—are rapidly losing value.
Temasek’s shift towards resources will be helped by the experience of Chip Goodyear, former chief of miner BHP Billiton Ltd, who succeeds Ho Ching, wife of Singapore’s prime minister, as chief executive in October.
His appointment is a clear move that Temasek is angling for more resources deals, analysts and investment bankers say.
“The shift by Asian sovereign wealth funds to commodity related investments makes perfect sense from a diversification, as well as strategic geopolitical standpoint,” said Kirby Daley, senior strategist, Newedge Group in Hong Kong. “I wouldn’t be surprised if we see much more of this activity going forward.”
China’s $200 billion wealth fund China Investment Corp. is also looking to invest in energy and commodities.
Temasek may be looking at Canadian miner Teck Cominco Ltd, which is scrambling to sell assets in a bid to raise cash to pay off a $5.8 billion bridge loan, the source familiar with the situation said.
Temasek is more likely to buy minority stakes in assets than acquire whole firms, another investment banker said.
At a recent mining conference in Singapore, Temasek’s managing director for investments, Nagi Hamiyeh, chaired a session with Rio Tinto Ltd’s chief financial officer Guy Elliott, and effectively interviewed him on the firm’s business plans. “The story of the cycle in resources is still intact, we are further believers of the China story and the urbanisation of China, India and other countries,” Hamiyeh told the conference.
Temasek is looking at resources in an opportunistic way, Hamiyeh later said.
But a person familiar with Temasek’s thinking said the Singapore investor will tread carefully as many countries regard their natural resources as strategic assets.