Singapore's Temasek says BP stake talk "speculation"

A staff member is reflected in a Temasek Holdings logo at their headquarters before the presentation of Temasek's annual review in Singapore September 17, 2009.

SINGAPORE (Reuters) - Singapore state investor Temasek, whose energy and resources portfolio grew by $3.6 billion (2.37 billion pound) last year, on Thursday dismissed talk it had held discussions with BP Plc (BP.L) for a strategic stake.

Temasek's comment comes amid speculation the troubled British oil major is approaching several sovereign wealth funds for cash to ward off a takeover and help pay for the worst oil spill in U.S. history. BP boss Tony Hayward met an Abu Dhabi state investment fund on Wednesday.

"It's speculation," Temasek Executive Director Simon Israel told reporters on Thursday when asked if Temasek was indeed talking to BP. Israel did not comment further.

Analysts say an investment in BP by Temasek is unlikely as it has repeatedly said it will focus on Asian investments, after losing billions investing in Western banks such as Merrill Lynch and Barclays (BARC.L) in the financial crisis.

A more likely candidate could be the $250 billion-plus Government of Singapore Investment Corp (GIC), Temasek's sister wealth fund, whose investments are more diversified internationally. GIC, which already owns about 0.7 percent of BP shares, has declined to comment on the subject.

Temasek released its 2010 annual report on Thursday, which showed the value of its portfolio rose 43 percent to S$186 billion at end-March, and said it was not searching for a successor to Chief Executive Ho Ching.

The growth took the portfolio of the world's eighth-largest sovereign fund to a record high, but it lagged some benchmarks and peers. Officials also said the value had fallen since March in line with weak global markets, but declined to give a figure.

"Last year's performance was a ride on a recovery from a very depressed base," said Song Seng Wun, an economist at CIMB.

"This (financial) year will be more challenging given the environment we are in now."

Temasek's focus on Asia, particularly at home in Singapore, increased in the 2009/10 financial year, and it said that strategy would be maintained for the foreseeable future, given volatility in other world markets.

"Choppy waters lie ahead, but Asia will maintain its secular long-term growth," Chairman S. Dhanabalan said in a statement. "Our focus on Asia continues."

SENSIBLE

Temasek said 78 percent of its portfolio was in Asia as of end-March, up from 74 percent a year previously. Investments in developed economies dropped to 20 percent from 22 percent.

"The Asian focus is right given that the pendulum has swung very clearly towards Asia," CIMB's Song said. "It's not wrong to look at commodities but the further you go, the less familiar you are with the area so there are going to be more risks."

Temasek's exposure to the energy and resources sector increased to S$11.6 billion, or 6 percent of its portfolio, in 2009/10 from S$6.5 billion, or 5 percent, in the previous year.

On Ho, who has been CEO since January 2004, Executive Director Simon Israel told reporters she was not leaving.

"Ho Ching is our CEO, she is continuing as our CEO," he said. "There is no, underline no, active, immediate search for a CEO."

Ho, 57, the wife of Singapore Prime Minister Lee Hsien Loong and fifth on Forbes' list of the most powerful women in the world last year, had earlier planned to leave by October 2009.

But Ho's designated successor, former BHP Billiton (BHP.AX) (BLT.L) CEO Charles Goodyear, left Temasek in July last year citing differences in strategy.

Speculation on Ho's future resurfaced in May when Temasek announced former Singapore Exchange (SGXL.SI) CEO Hsieh Fu Hua would join as executive director and president to assist her in areas such as talent development and succession planning.

FINANCIALS UP

By sector, Temasek increased its investments in the financial sector to 37 percent of its portfolio from 33 percent. Exposure to telecommunications, media and tech sectors dropped to 24 percent from 27 percent, while investments in transport and industrials fell to 18 percent from 19 percent.

Temasek's net profit for the financial year fell to S$4.6 billion from S$6.2 billion, which it said was due to lower contributions from portfolio firms.

And the one-year growth of its portfolio lagged the MSCI Asia ex-Japan index .MIAPJ0000PUS, which rose 63 percent in the 12 months to March in Singapore dollar terms, according to Temasek. According to Reuters' calculations, Templeton Emerging Markets Fund returned 68 percent in the same period.

"We are not a fund," Executive Director Israel said, adding Temasek had returned an annualised 17 percent since its inception in 1974. "We are a long-term investor. We do not enter and exit markets the way a fund does."

Temasek is wholly owned by Singapore's Ministry of Finance, but plans to eventually allow the public to invest in it.

As a test case, officials said subsidiary investment vehicle SeaTown Holdings would look at co-investment from financial institutions in three to five years.

(Editing by Muralikumar Anantharaman)