Summary
This article summarises Temasek's recent equity investment in Merrill, including the price paid and future intentions. Temasek appears to be more than satisfied with its investment and is inclined toward similar investments (financial institutions undervalued due to over-estimates of subprime/CDO related losses) in the near future.
Analysis
Its not surprising that Temasek supports Merrill, despite its subprime problems. First, it has been less than a month since the investment in Merrill was announced and absent some sort of horror scenario,(e.g. the new CEO is jailed for fraud, actual losses in excess of US $500 billion are revealed and the company declares bankruptcy) Temasek is hardly going to declare its equity purchase was a mistake. Second, it would be foolish for Temasek (and other sovereign funds) not to invest in Merrill or institutions of its ilk. To date, the overly-publicised "losses" are not cash shortfalls due to non-receipt of cash due bond portfolios, but declines in market value. There is a big difference between the two. Investors that can figure it out must act quickly. Opportunities like this arise rarely, if ever, in a lifetime.
