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Singapore sovereign fund Temasek sees profits plunge

SINGAPORE, Jul  8 – Singapore\’s influential state-linked investment firm Temasek Holdings said on Thursday its net profit in the year ended March had fallen 26 percent due to the lingering impact of the global crisis.

The firm\’s net profit of 4.6 billion Singaporean dollars (3.33 billion US) compared with 6.2 billion dollars the previous financial year, the sovereign wealth fund said.

The decline was due to "lower profit contributions from some of the portfolio companies which were impacted by the global financial crisis," it said as it released its annual report.

The city state\’s sovereign fund has been a major investor behind the phenomenal growth story that has characterised much of Asia in recent years.

But among the victims of the global crisis that struck in the third quarter of 2008 following the collapse of US bank Lehman Brothers were companies that Temasek had invested in.

Temasek had taken a stake in Wall Street icon Merrill Lynch but divested its interest when the US firm was bought by Bank of America. It also bought into British lender Barclays but later off-loaded that stake.

Temasek is estimated to have lost more than 5.4 billion US dollars from the sale of its holdings in the two banks, according to Dow Jones newswires.

On Thursday Temasek said the total value of its investments worldwide stood at a record 186 billion dollars as of March 31, up from 130 billion dollars the year before and reflecting a strong recovery from the recession.

The amount was higher than the pre-crisis value of its global portfolio, which was 185 billion dollars in March 2008.

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Nearly 80 percent of Temasek\’s investments are in Asia, including Singapore, the company said.

Executive director Simon Israel said Temasek was likely to increase its exposure to Asia in the next 10 years.

But he added the company "will continue to maintain the full flexibility to shift our portfolio stance in response to major developments, trends or market opportunities".

During the last financial year, Temasek made new investments totalling 10 billion dollars, including stakes in a platinum producer in South Africa and a Canada-listed oil and gas firm. It made six billion dollars in divestments.

Earnings have declined since the record 18 billion-dollar net profit achieved in the financial year ended March 2008.

"We expect global growth to be slower in the medium term, with Asia maintaining its secular long term growth path," Temasek chief executive Ho Ching said in a statement. "Our focus on Asia will continue."

As of March 31, 2010, Temasek\’s underlying exposure to Singapore was 32 percent, while the rest of Asia excluding Japan stood at about 46 percent, the firm said.

Investments in the OECD — the Paris-based group of industrialised nations — and other economies totalled 22 percent.

Temasek chairman S. Dhanabalan cited protectionism in developed countries and asset bubbles in developing economies among the risks for the global economy.

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"Protectionism may rear its head as developed markets struggle to cope with high unemployment, weak fiscal positions and mounting debt burdens," Dhanabalan said.

"On the other hand, developing markets risk asset bubbles, and loose lending may haunt their banking system down the road."

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