Temasek expands in China

SINGAPORE - Temasek Holdings may double its investment in China Construction Bank to US$2.4 billion ($3.4 billion) as part of a plan to expand overseas and reduce shareholdings in the city's slower-growing economy, sources say.

They said Singapore's state-owned fund management company offered to buy US$1.4 billion of stock in China's third-largest bank before an initial public offering in October.

Last month, the Beijing-based bank said Temasek would invest US$1 billion in the IPO itself.

Temasek, which has US$55 billion of assets, wants to boost returns that averaged 3 per cent in the past decade by investing in China's US$1.65 trillion economy, which is 15 times the size of Singapore's.

European and US banks have spent more than US$6 billion buying stakes in China's lenders since 2003 to tap an economy that's grown an average 9.5 per cent during the past two decades.

"Banks usually benefit more than other industries in a rising economy," said Kingston Lee, director of Nomura Asset Management in Hong Kong.

"There aren't many good investment opportunities in China and banking seems to be the last sector available."

Last year, Temasek said it had more than half its assets in Singapore, with China, Taiwan and Korea accounting for 6 per cent of total holdings by the end of March.

Temasek owns 28 per cent of DBS Group, Singapore's largest bank, and is expanding across Asia to reduce a reliance on the city state, which accounts for half of its assets. This year, it bought a stake in China Minsheng Banking.

- BLOOMBERG