Flush With Cash, Temasek Turns ‘Bullish on Tech’

Saeed Azhar

Singapore. Temasek, Singapore’s $1.2 trillion sovereign wealth fund, may be looking to snap up stakes in technology companies, joining other big institutional investors in turning bullish on the sector’s improving outlook.

The possible shift comes as expectations of strong Asian demand and a rebound in corporate spending have boosted shares in global tech companies, driving up Intel stock by 4 percent to its highest in more than a year.

Such a move would fit Temasek’s recent portfolio shift into new sectors beyond financial companies and telecoms.

Temasek, which recently bought shares in search-engine company Yahoo, is not only looking at blue-chips, but may consider buying private companies ahead of them listing on global exchanges such as Nasdaq, said sources familiar with the plans.

The potential investments follow recent stake purchases in China’s Shanda Interactive and Blackberry-maker Research in Motion, according to filings in late February.

Late last year, Temasek pumped $242 million into buying shares in South Korean light emitting diode company Seoul Semiconductor and its affiliate.

“They are really keen to invest in technology companies that are innovative,” said a source familiar with such deals. “This also means investing at the pre-IPO stage.” The sources asked not to be identified as Temasek’s investment plans are not public.

Technology accounted for just 1 percent of Temasek’s portfolio in its past financial year, while a third of the assets were in financials and about a quarter in telecoms and media.

Other sovereign funds, except for Abu Dhabi, have smaller exposure to the technology sector.

Temasek shied away from big M&A deals in 2009, cautious after losing billions of dollars on Western banks. It has either supported its portfolio companies or bought smaller stakes in newly listed companies, mimicking the strategy of the country’s other state wealth fund, the Government of Singapore Investment Corporation. But Temasek has built up a big war chest after selling assets such as a stake in Bank of America and raising $3.9 billion through bond sales since October.

Temasek is not the only large institutional investor bullish on technology. Henderson Global Investors and Franklin Templeton are positive on the sector, which has come a long way from the dot-com bubble burst a decade ago.

“Technology has the potential to outperform in 2010,” said Stuart Gorman, Edinburgh-based director of technology equities at Henderson. “Now, 10 years post-bubble, we have a very different beast.” He said demand was improving, companies were well run, with strong balance sheets and significant revenue visibility, and valuations are attractive.

Henderson is bullish on e-commerce companies such as Amazon.com, online advertising through Google and Baidu, online entertainment and companies that would help in building enterprise infrastructure.

Temasek’s renewed interest in the sector comes after it pared down its tech holdings — mainly in the microchip industry — in recent years.

It recently sold chipmaker Chartered Semiconductor for $1.8 billion to an Abu Dhabi state fund after the loss-making company had relied on Temasek financial support for years.

Its takeover of STATS ChipPAC, just before the credit crisis erupted, is under water with shares of the chip-testing company trading 42 percent below the 1.75 Singapore dollars a share that Temasek paid.

However, valuations could still attract funds such as Temasek and other strategic investors into tech blue-chips.

“We’re paying much the same price for Microsoft today as at the peak of the tech bubble 10 years ago,” said Peter Wilmshurst, a portfolio manager at Franklin Templeton, noting Microsoft has grown rapidly but still has a price-to-earnings ratio in the teens.

Reuters