Singapore’s GIC says to explore Morgan Stanley

Deals

The Government of Singapore Investment Corp (GIC), one of the world’s biggest sovereign funds, said on Thursday it may explore an investment such as Morgan Stanley, if it is approached.

“GIC explores all opportunities when approached,” Jennifer Lewis, spokeswoman for the Singapore state fund, said in an emailed reply to a Reuters query on whether the fund is considering investing in Morgan Stanley.

Government of Singapore Investment Corp, which rarely comments when asked about specific firms or potential deals, said earlier this year it could invest in more banks in the United States and Europe if it gets the chance, as it looks for long-term returns. Lewis declined to comment if Morgan Stanley had approached GIC, which already holds stakes in big Western banks Citigroup and UBS.

A Morgan Stanley spokesman in Hong Kong also declined to comment if the US bank had approached GIC for investment. GIC has been active recently along with other funds in Asia and the Middle East in buying stakes in Western banks damaged by the global credit crisis. Traditionally, GIC, which manages the Singapore central bank’s reserves and operates like an institutional fund, only buys minority stakes in companies and avoids taking controlling stakes, unlike its smaller sister fund Temasek Holdings.

GIC says it manages well above $100 billion, but many analysts estimate the figure could be three times that. Morgan Stanley has said GIC is the world’s third-biggest state fund. Media reports stated earlier that Morgan Stanley may be in merger talks with US bank Wachovia to escape the worsening credit crunch.

Shares of Morgan Stanley and bigger rival Goldman Sachs fell as much as 43% and 27%, respectively, on Wednesday, even as both posted better-than-expected earnings. Manu Bhaskaran, a partner at US-based advisory group Centennial, said a GIC investment was worth examining given the global scale of banks such as Morgan Stanley. “The challenge is to look at the downside,” said Singapore-based Bhaskaran. “If you can cap the downside then you are getting into a very good franchise.”

David Lum, banking analyst at Daiwa Securities, said that with investment banks’ shares so low, there was a window of opportunity. Sovereign funds invested $25.5 billion so far this year to buy stakes in global firms such as Merrill Lynch -- an increase of 66% from a year earlier, according to Thomson Reuters data. These state-backed funds took part in 22 deals. Ten of those, worth a combined $9.1 billion, involved Singapore’s two sovereign funds, Temasek and GIC, according to data up to August 28.

Sovereign funds, estimated to hold assets worth as much as $3 trillion, have ballooned in recent years as large Asian exporting countries, such as China, and oil-rich nations such as Abu Dhabi and Russia, started putting part of their currency reserves into investment vehicles. (Reuters)

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