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March 21, 2006 4:34 pm

SingTel plunges on share sale

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Fears that Temasek would continue to cut its holdings in Singapore Telecommunications on Tuesday drove SingTel shares down 6.4 per cent – the group’s sharpest one-day decline in more than four years.

Temasek, the Singapore state investment agency, sold a 4.7 per cent stake for S$2bn (US$1.2bn). The price was a 5 per cent discount to SingTel’s closing price of S$2.80 on Monday, and reduced Temasek’s controlling stake in south-east Asia’s biggest telecoms group to 56.3 per cent from 61 per cent.

The resulting share fall wiped S$3bn off the group’s market capitalisation. The transaction revived investor fears that Temasek – SingTel’s biggest shareholder – might be offloading stock once the share price reached a certain level.

Further sell-downs seem likely as Temasek raises funds to finance its overseas expansion, including its recent purchase of Thailand’s Shin Corp and several Chinese banks.

It is the third time that Temasek has reduced its stake in SingTel since 2004.

Under its bilateral trade pact with the US in 2003, Singapore promised to divest completely state ownership of SingTel over an unspecified period.

Temasek has also said it aims to cut total holdings in Singapore to a third of its portfolio from about half as it seeks to acquire assets in Asia and advanced industrial countries.

In the past year Temasek has disposed of stakes in affiliated companies including SembCorp Industries, ST Engineering, Keppel Corp and CapitaLand.

DBS, the Temasek-controlled bank, predicted that SingTel’s share price would recover after suffering a short-term decline, following a similar pattern set by the last two placements in 2004. It predicted a one-year target price of S$2.89.

Temasek defended the share placement with institutional investors, arranged by Goldman Sachs, saying it would increase SingTel’s free-float.

SingTel’s initial public offering was priced at S$3.60 in 1993.

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