UPDATE 2-Singapore's Temasek says BP stake talk is 'speculation'

By Kevin Lim and Raju Gopalakrishnan

SINGAPORE, July 8 (Reuters) - Singapore state investor Temasek Holdings dismissed talk it had held discussions with troubled British oil company BP Plc for a strategic stake.

'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.

Temasek's comment comes after BP boss Tony Hayward met an Abu Dhabi state investment fund on Wednesday, part of a quest for cash to ward off takeovers and help pay for the worst oil spill in U.S. history.

The Singapore wealth fund also released its 2010 annual report on Thursday that showed the value of its portfolio rose an annual 43 percent to S$186 billion ($134 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 Singapore, increased in the 2009/10 financial year, and it said that strategy would be maintained for the forseeable 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.'

Song of CIMB said the Asia strategy was sensible, but other investments, especially an increased focus on resource stocks, carried risks.

'The Asian focus is right given that the pendulum has swung very clearly towards Asia,' he 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 investments in 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.



HO STAYING

Executive Director Simon Israel emphatically told reporters Ho was staying as CEO of Temasek.

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

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

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

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

Ho, 57, has been CEO since January 2004.

In its report, 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.

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.



'NOT A FUND'

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, 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.'

Chief Financial Officer Leong Wai Leng said at least 23 percent of Temasek's holdings were in unlisted assets, which were calculated at book value and therefore did not reflect the rise in valuations of listed assets as markets surged in 2009/10.

'As a long term investor, it (Temasek) has the option to take concentrated positions. It is important to note that we do not manage our portfolio relative to the capital markets,' Leong said.

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)

(([e-mail]; [phone]; Reuters Messaging: [e-mail])) Keywords: TEMASEK/ (If you have a query or comment on this story, send an email to [e-mail]) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.