Singapore's giant state-owned investment company Temasek has splashed out HK$44 billion to own an almost 25 per cent stake in billionaire Li Ka-shing's retail arm AS Watson. The investment by the sovereign fund - its biggest ever in Hong Kong - halted the planned US$6 billion listing of AS Watson, which Li now says is "unlikely to happen this year". Li said at a media briefing yesterday: "At the time of listing in about two to three years, Watson's valuation must be higher than the price Temasek paid. The share sale should be taking place in Hong Kong and Singapore." At the time of listing in about two to three years, Watson's valuation must be higher than the price Temasek paid. The share sale should be taking place in Hong Kong and Singapore Li Ka-shing That dashed earlier speculation the firm wanted a dual listing in Hong Kong and London, followed by a secondary listing in Singapore. Li said there was too much work involved in listing in three different jurisdictions and would be too clumsy. The deal, which put a price-earnings ratio of 23 times last year's earnings on AS Watson, is seen as a huge bet for Temasek. Top-line growth and profit margin in Hong Kong has been largely flat, but the health and beauty unit of AS Watson on the mainland has grown rapidly thanks to store expansion. AS Watson is China's largest drug store chain, with a one-fifth share of the market. It is also the largest health and beauty retailer in Asia and Europe, operating more than 10,500 stores in 25 markets. Temasek will be the second largest shareholder, with two seats on the board. Chia Song Hwee, head of Temasek's investment section, said: "The consumer retail sector is a good proxy to growing middle-income populations and transforming economies. "This is very much part of our investment theme as we shape Temasek's portfolio for the long term. We continue to believe in the growth opportunities and long term prospects of Asia, particularly China, and a recovering Europe." Temasek also has a stake in China's biggest bank, Industrial and Commercial Bank of China, and trading group Li & Fung. Canning Fok, managing director of Hutchison Whampoa, said that having a high quality investor such as Temasek was much better than taking AS Watson public abruptly or selling shares to a cluster of funds. "A Singapore listing is sensible since they have a number of large institutional funds," said Fok. Li, asked whether he planned further sales of his assets in the next twelve months, hinted that the decision would depend on the selling price. "We will not rule out the option," he insisted. But he reiterated that he had no interest in offloading any further stakes in AS Watson. Responding to accusations of Li's withdrawal of investment from Hong Kong, Hutchison Whampoa said in a statement on Friday that they saw the stake sale as means of bringing proceeds back to the company's Hong Kong shareholders, since 94 per cent of A.S. Watson’s business (in terms of store numbers) were outside of Hong Kong.