Singaporean sovereign wealth fund Temasek Holdings' investment reversals in two of the largest mainland banks in the past two months have drawn criticism that it was acting like a hedge fund rather than a long-term investor.
In early July, Temasek sold 1.5 billion shares of China Construction Bank (CCB), the mainland's second-largest lender by market capitalisation, at HK$6.26 per share. Less than two months later, Temasek bought back 4.4 billion CCB shares for about HK$4.94 apiece - a 21.2 per cent discount to its earlier selling price - raising its stake to 8.1 per cent. Temasek bought back the shares on the same day that Bank of America (BofA), desperate to raise capital, sold about 13.1 billion CCB shares.
'It seems unusual for a sovereign wealth fund to trade in and out of positions in such a short time,' said James Antos, a senior analyst at Mizuho Securities. 'This very rapid pace of trade resembles what a hedge fund does.'
Temasek's behaviour is sending mixed signals to Beijing, he said, because while the sovereign fund made huge gains out of the deals, it also helped stabilise share prices.
Market observers say the timing of Temasek's exit from and re-entry into CCB has been strategically astute. Analysts speculate that Temasek divested its shares in CCB not only because the bank's share price was declining, but also because Temasek knew BofA would be forced to sell some of its holdings in CCB to raise capital, which could further depress CCB shares.
Temasek declined to comment. However, as it was selling down its CCB holdings, Temasek said the move was part of its regular portfolio rebalancing.