THE credit ratings agency Standard and Poor's affirmed its top AAA long-term corporate credit rating with a stable outlook for Singapore's state-linked investment firm Temasek holdings.

Temasek controls some of Asia's best-known companies including Singapore Airlines, Chartered Semiconductor, Neptune Orient Lines, port operator PSA International and Singapore Telecommunications.

It is one of two vehicles used by Singapore to invest its massive savings globally, and has stakes in Indonesia's PT Indosat, DBS Group Holdings, PT Bank Danamon Indonesia, as well as other firms.

'Most of the major investments and Temasek-linked companies have very strong market positions,' said Standard and Poor's credit analyst Anshukant Taneja. 'These entities are expected to continue to generate steady and sustainable cash flows for the group, despite intensifying competition in their operating segments.'

In August, Temasek said its net profit fell 29 per cent in the year to March, partly because of the impairment of its investment in Thailand's Shin Corp, as well as from a much reduced level of divestments.

Net profit in the year to March 31 was 9.1 billion dollars (S$9 billion, down from 12.8 billion dollars a year ago.

Temasek bought 49 percent of Shin in January last year for nearly US$1.9 billion tax-free from the family of then Thai Prime Minister Thaksin Shinawatra.

The purchase sparked a scandal which triggered mass protests against Thaksin, and culminated in his overthrow in a bloodless military coup last September.

S and P noted that Temasek's exposure to 'emerging' Asia has been rising in the past few years to 40 per cent of total investments.

'This exposes Temasek to country, legal and regulatory risks. Political resistance, operation in unfamiliar markets and exposure to local management or partners in investments where Temasek does not have management control are other concerns,' the agency said.

Temasek also has rising exposure to the banking and financial services sectors, it said.

'Although this may reflect growth opportunities associated with a growing middle class in rising Asian economies, it increases Temasek's exposure to global trends of unpredictable asset cycles and contagion, potentially increasing the variability of its investment portfolio and earnings,' Mr Taneja said.

S and P said Temasek maintains a very conservative capital structure and strong liquidity at the holding company level. It has low net debt of less than one billion Singapore dollars, the agency said.

'In our view, the company has substantial capacity to raise additional debt,' said Mr Taneja. 'We also expect Temasek to maintain strict financial discipline and significant liquidity on its balance sheet as it executes its growth strategy.'

Temasek and its Singapore Airlines subsidiary are to buy a combined 24 per cent stake in China Eastern Airlines, the firms said early this month.

The Singaporean national carrier and Temasek will inject a combined HK$7.2 billion (US$923 million ) into the struggling Chinese airline to buy nearly 1.9 billion new shares in the firm.

Singapore Airlines will buy 1.24 billion shares for a 15.7 per cent stake and Temasek 649 million shares for an 8.3 per cent slice, the firms said. -- AFP

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