Temasek cuts losses in Bank of America

Temasek Holdings has divested its stake in Bank of America, as it seeks to reduce its exposure to OECD economies.

Temasek Holdings, one of two Singaporean sovereign wealth funds, has sold its entire stake in Bank of America, reportedly resulting in losses of between $2.3 billion and $4.6 billion.

Temasek’s 31 March filing with the US Securities and Exchange Commission revealed that the fund is no longer a shareholder in either Bank of America or Merrill Lynch. Temasek confirmed the sales but did not comment further.

The sovereign fund held 188.8 million shares in Bank of America, which were sold in a series of deals in the first three months of 2009, according to Singapore’s Straits Times. Temasek had invested $5.1 billion in Merrill Lynch for a stake of about 14 percent. This stake was converted into Bank of America shares following its acquisition of Merrill Lynch, giving Temasek a holding of about 3 percent in Bank of America, the paper reported.

Temasek’s investment portfolio was worth S$127 billion ($86 billion; €64 billion) as of 30 November 2008, down 31 percent from 31 March 2008, when it had a portfolio worth S$185 billion. “The global financial crisis has reset our portfolio value back three years to March 2006 levels,” Ho Ching, the executive director and chief executive officer of Temasek, said in a speech on 12 May.

The sale of its stake in Bank of America is likely in keeping with Temasek’s aim to decrease its allocation to OECD economies. The fund, which initially invested predominantly in Singapore and the OECD countries, is reducing its OECD exposure to 20 percent of its total portfolio and adding a 10 percent exposure to new geographies such as Latin America, Africa and Russia. The fund has also increased its exposure to Asian economies other than Singapore.

Temasek’s exposure to Asia ex-Singapore has been more than 40 percent over the last two years. Last week, perhaps in keeping with its aim to build up its Asian portfolio, Temasek increased its shareholding in China Construction Bank.