Bloomberg News

Temasek Seeks to Boost Quota for Mainland Chinese Securities

June 13, 2012

Temasek Holdings CIO Tan Chong Lee

Temasek Holdings Pte. Chief Investment Officer Tan Chong Lee. Photographer: Munshi Ahmed/Bloomberg

Temasek Holdings Pte, which holds stakes in China’s biggest banks, said it filed an application to boost its quota for publicly traded securities in mainland exchanges to tap the nation’s long-term growth.

The Singapore state-owned investment company is seeking to increase allocations through the so-called qualified foreign institutional investor, or QFII, program, it said in an e-mailed statement today. Only approved institutional investors can buy or sell yuan-denominated securities under the QFII program.

Temasek, which managed S$193 billion ($151 billion) as of March 2011, filed the latest application after the China Securities Regulatory Commission said in April it would more than double the amount that overseas institutional investors are allowed to invest in Chinese securities to $80 billion. The foreign-exchange regulator said last month that it will speed up the approval process.

“They are obviously bullish on the China A-shares market,” said Mohammed Apabhai, head of Asia trading strategy at Citigroup Inc. in Hong Kong, referring to yuan-denominated stocks on mainland exchanges. “I would expect it’s because they are thinking there’s more policy easing.”

China lowered its benchmark interest rate on June 7, the first cut in borrowing costs since 2008. Gross domestic product will increase 7.9 percent this quarter, the least in three years, from 8.1 percent in the previous three months, according to the median estimate of economists surveyed by Bloomberg News. Growth is forecast to quicken to 8.3 percent in the third quarter and 8.4 percent in the fourth, the surveys show.

Long-Term Growth

“Temasek, as an investor who invests for long-term returns, remains confident and optimistic in China’s long-term growth,” the Singapore investment company said in the e-mailed statement today. “We will continue invest in the sectors that support China’s transforming economy.”

Temasek is seeking to raise its quota by $700 million, Xinhua News Agency reported earlier.

Temasek spent $2.3 billion investing in shares of Industrial & Commercial Bank of China Ltd. (3988) in April, and holds a 5.3 percent stake in the Hong Kong-traded stock of the world’s biggest bank by market value, according a statement on May 22.

China’s benchmark Shanghai Composite Index (SHCOMP) climbed 4.8 percent this year, compared with the 0.8 percent decline in the MSCI Asia Pacific Index and a 0.5 percent gain in the MSCI World Index. (MXWO) At 10 times estimated earnings, the current Shanghai Composite valuation compares with the MSCI Asia Pacific Index’s multiple of 11.5.

Chinese regulators had approved a combined $26 billion in investments for 138 QFIIs as of May 8, according to SAFE’s statistics.

Stock Demand

For China, reviving demand for equities among investors is important in a market where individuals own 26.5 percent of the nation’s stocks, compared with 15.6 percent held by institutional investors and 57.9 percent by corporate holders, according to the CSRC’s investor protection bureau.

“Just because they are applying for more QFII doesn’t mean they are going to step in to buy right now,” Apabhai said of Temasek’s QFII application. “They are probably just applying for it so that they can do something” in the future.

Temasek’s Chief Investment Officer Tan Chong Lee said in an interview this week the turmoil in Europe may result in a market slump rivaling the 2008 global financial crisis, creating opportunities for the company to make deals.

Temasek may fund European companies expanding in growth markets like Asia and Latin America, or form ventures with firms seeking mergers or acquisitions, he said, adding he’s optimistic about China’s long-term potential.

To contact the reporter on this story: Weiyi Lim in Singapore at wlim26@bloomberg.net

To contact the editor responsible for this story: Andreea Papuc at apapuc1@bloomberg.net; Darren Boey at dboey@bloomberg.net


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