Temasek’s Merrill investment bleeds as economic outlook worsens

July 18, 2008
Singapore Democrats

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Even as the economic outlook worsens, Temasek’s investment in Merrill Lynch continues to bleed

Merrill Loss Is $4.9 Billion, May Sell $8 Billion Assets
Josh Fineman & Bradley Keoun
Bloomberg

Merrill Lynch & Co. probably will report its fourth straight quarterly loss later today because of credit-market writedowns, analysts estimate.

The third-biggest U.S. securities firm may post a second- quarter net loss of $1.91 a share, according to the average estimate of 18 analysts surveyed by Bloomberg. Forecasts range from a loss of 93 cents a share to a loss of $4.21.

Merrill dropped efforts to sell a stake in BlackRock Inc. and struck a deal to sell its 20 percent share of Bloomberg LP, people with knowledge of the decision said yesterday.

Chief Executive Officer John Thain is selling assets as analysts at Citigroup Inc., Oppenheimer & Co. and Wachovia Corp. predict the company will report at least $5 billion of writedowns.

Merrill agreed to sell its investment in Bloomberg LP, the parent of Bloomberg News, for $4.5 billion, a person familiar with Merrill’s plans said. New York-based Merrill is financing the sale to Bloomberg, said the person, who declined to be identified because terms haven’t been announced.

“If proceeds from the sale are enough to cover the writedowns, I think it’s a huge positive,” said Ken Crawford, senior portfolio manager at St. Louis-based Argent Capital Management LLC, which held almost 300,000 Merrill shares at the end of March. “If it’s not enough, then I think investors will wrestle with what did they report and what do they think they need in terms of capital raise going forward.”

Merrill typically reports its quarterly results before trading begins on the New York Stock Exchange. The company will post the latest figures today after the market shuts. Merrill gained 83 cents in German trading to $28.83.

Shares gain

Merrill stood to gain about $2 billion on its 49.8 percent stake in New York-based BlackRock, the largest publicly traded U.S. fund manager, based on its current market value. BlackRock fell 17.5 percent in New York trading this year, partly on concern Merrill would divest its holding.

“I would prefer that they own the position in Blackrock because it’s a strategic asset for them,” Crawford said.

Jessica Oppenheim, a spokeswoman for Merrill, declined to comment yesterday. BlackRock CEO Laurence Fink declined to comment through a spokeswoman. Bloomberg spokeswoman Judith Czelusniak in New York also declined to comment.

Merrill rose $3.31, or 13 percent, to $28 in New York Stock Exchange composite trading yesterday, trimming this year’s drop to 48 percent. BlackRock climbed $14.77, or 9 percent, to $178.95.

Capital raisings

Thain, 53, has raised $17.9 billion since December from investors including Temasek Holdings Pte, Singapore’s sovereign wealth fund. Merrill’s $38.2 billion of writedowns and credit losses since the beginning of last year are the third-largest among banks and brokerages hit by the credit-market contraction, after Citigroup Inc. and UBS AG, data compiled by Bloomberg show.

Oppenheimer & Co. analyst Meredith Whitney predicted in a July 2 report that Thain would raise cash by selling stakes in BlackRock and Bloomberg before announcing earnings. On its books, Merrill values the BlackRock holding at about $8 billion. It’s worth about $10 billion, based on the company’s market value.

Merrill’s agreement to sell its stake in Bloomberg LP back to its corporate parent, Bloomberg Inc., may be announced as soon as today, the person familiar with Merrill’s plans said. Bloomberg is majority owned by New York City Mayor Michael Bloomberg.

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=agqiA7l6nLlA

Singapore June non-oil domestic exports fall 10.5 pct
Pearl Bantillo & Jonathan Burgos
Thomson Financial

Singapore’s non-oil domestic exports in June fell 10.5 percent to S$12.8 billion from a year ago with sharp declines in shipments to key markets such as the United States, Europe and China, the International Enterprise Singapore (IE Singapore) said on Thursday.

The decline was the same as the previous month’s fall but came in worse than analysts’ forecast of a 6.7 percent drop, as exports of electronics and pharmaceuticals continued to slump.

Electronics exports fell 14.6 percent in June from a year ago as demand for semiconductor chips, disk drives and consumer electronics products tanked, IE Singapore said. Pharmaceutical exports, meanwhile, slid down 22.3 percent.

Seven out of the city-state’s 10 major markets registered declines in shipments, led by the 24 percent fall in exports to the United States, which is suffering from a housing slump and credit crisis. Exports to Europe declined 16 percent and were down 12 percent to China.

Shipments to Malaysia, South Korea and Hong Kong, meanwhile, were marginally higher, ranging from 0.5 to 12.0 percent.

‘This indicated weakness in external demand, which highlights the risk to exports numbers,’ said Song Seng Wun, regional economist at CIMB-GK Research. ‘We should be prepared for even more ugly export numbers in the coming months,’ he said.

Seasonally-adjusted, June non-oil domestic exports grew 4.2 percent from the previous month, reversing a 9.8 percent monthly decline in May but lower than the 5.0 percent growth forecast of economists polled by Thomson IFR.

The weak external demand will exert a significant drag on Singapore’s manufacturing sector, which accounts for about a third of the city-state’s economy.

‘The hit of manufacturing momentum could well go into the third quarter,’ said Standard Chartered economist Alvin Liew.

The city-state’s gross domestic product grew at a much slower annual pace of 1.9 percent in the second quarter from 6.9 percent in the first due to a slump in biomedical production, declining 6.6 percent from the first, based on the government’s advance estimate.

Liew warned the Singapore economy may enter its first technical recession, defined as two consecutive quarters of contraction, in six years.

http://www.forbes.com/afxnewslimited/feeds/afx/2008/07/17/afx5224068.html